SB Financial Group Inc.

03/06/2026 | Press release | Distributed by Public on 03/06/2026 11:49

Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations.

SB Financial Group, Inc. ("SB Financial"), is a financial holding company registered with the Federal Reserve Board and subject to regulation under the Bank Holding Company Act of 1956, as amended. Through its direct and indirect subsidiaries, including The State Bank and Trust Company ("State Bank"), SB Financial is engaged in commercial and retail banking, wealth management and private client financial services.

The following discussion provides a review of the consolidated financial condition and results of operations of SB Financial and its subsidiaries (collectively, the "Company"). This discussion should be read in conjunction with the Company's Consolidated Financial Statements and related Notes as of and for the years ended December 31, 2025, and 2024 included in this Annual Report on Form 10-K.

Strategic Discussion

The focus and strategic goal of the Company is to grow into and remain a top decile (>90th percentile) independent financial services company, as measured by annual return on average assets compared to our defined peer group. The Company intends to achieve and maintain that goal by executing our five key initiatives.

Increase profitability through ongoing diversification of revenue streams: For the twelve months ended December 31, 2025, the Company generated $17.1 million in noninterest income, or 26.1 percent of total operating revenue, from fee-based products. These revenue sources include fees generated from saleable residential mortgage loans, retail deposit products, wealth management services, saleable business-based loans (small business and farm service) and title agency revenue. For the twelve months ended December 31, 2024, the Company generated $17.0 million in noninterest income, or 29.9 percent of total operating revenue, from fee-based products.

Strengthen our penetration in all markets served: Over our 123-year history of continuous operation in Northwest Ohio, we have established a significant presence in our traditional markets in Defiance, Fulton, Paulding and Williams counties in Ohio. In our newer markets of Bowling Green, Columbus, Findlay, Toledo (Ohio) and Ft. Wayne (Indiana), our current market penetration is minimal, but we believe our potential for growth is significant. Over the past few years, we have expanded and committed additional resources to our presence in the Findlay and Edgerton markets in particular; however, we continue to seek to expand the presence and penetration in all of our markets. On January 17, 2025, we established our presence in Ottawa County with the acquisition of The Marblehead Bank located in Marblehead, Ohio. In late 2025, we expanded our Loan Production office in Angola, Indiana into a full service retail location and we expanded into the neighboring community of Napoleon, Ohio with a hybrid retail location.

Expand product utilization by new and existing customers: As of December 31, 2025, we operated in 15 counties in Northwest Ohio, Central Ohio and Northeast Indiana with 27 full-service offices, 27 ATM's and four loan production offices. Combined in the 15 counties of operation, we command 0.93 percent of the deposit market share, which has steadily grown. In our traditional markets of Northwest Ohio, the deposit market share is 4.63 percent, which is up from 4.40 percent in 2024.

Deliver gains in operational excellence: Our management team believes that becoming and remaining a high-performance financial services company will depend upon seamlessly and consistently delivering operational excellence, as demonstrated by the Company's leadership in the origination and servicing of residential mortgage loans. As of December 31, 2025, the Company serviced 8,886 residential mortgage loans with an aggregate principal balance of $1.48 billion. As of December 31, 2024, the Company serviced 8,750 loans with an aggregate principal balance of $1.43 billion.

Sustain asset quality: As of December 31, 2025, the Company's asset quality metrics remained strong. Specifically, total nonperforming assets were $4.7 million, or 0.30 percent of total assets. Total delinquent loans at December 31, 2025, were 0.49 percent of total loans. As of December 31, 2024, the Company had total nonperforming assets of $5.5 million, or 0.40 percent of total assets. Total delinquent loans at December 31, 2024, were 0.63 percent of total loans.

The successful execution of these five strategies has enabled the Company to improve financial performance across a broad series of metrics. These metrics over the last five years are outlined in the following table. Specifically, the Company has increased total assets by $286.2 million, or 22.7 percent. The growth has been on both sides of the balance sheet over the five-year period, with loans growing $307.9 million, or 35.3 percent and deposits growing $258.2 million, or 24.6 percent.

During the prior five-year period, the Company has raised capital through the issuance of debt securities to the market, which has improved capital significantly and expanded liquidity for potential strategic expansion. Strategic expansion has also occurred during the period with the acquisition of two small community banks (The Edon State Bank of Edon, Ohio in 2020 and The Marblehead Bank in January 2025), the opening of five branch offices and the acquisition of two full-service title agencies.

Financial Highlights

Year Ended December 31,

($ in thousands, except per share data)

2025 2024 2023 2022 2021
Earnings
Interest income $ 73,920 $ 64,349 $ 58,152 $ 44,569 $ 41,904
Interest expense 25,467 24,427 18,879 5,170 4,020
Net interest income 48,453 39,922 39,273 39,399 37,884
Provision for loan losses 1,306 124 315 - 1,050
Noninterest income 17,107 17,017 17,721 18,231 30,697
Noninterest expense 46,999 42,959 41,962 42,314 44,808
Provision for income taxes 3,281 2,386 2,622 2,795 4,446
Net income 13,974 11,470 12,095 12,521 18,277
Net income available to common shareholders 13,974 11,470 12,095 12,521 18,277
Per Common Share Data
Basic earnings $ 2.19 $ 1.72 $ 1.77 $ 1.79 $ 2.58
Diluted earnings 2.19 1.72 1.75 1.77 2.56
Cash dividends declared 0.60 0.56 0.52 0.48 0.44
Total equity per share 22.65 19.64 18.50 17.08 21.05
Average Balances
Average total assets $ 1,499,323 $ 1,361,274 $ 1,334,644 $ 1,318,781 $ 1,322,253
Average equity 134,606 124,742 118,315 126,963 144,223
Ratios
Return on average total assets 0.93 % 0.84 % 0.91 % 0.95 % 1.38 %
Return on average equity 10.38 9.19 10.22 9.86 12.67
Cash dividend payout ratio1 27.54 32.87 29.62 27.25 17.18
Average equity to average assets 8.98 9.16 8.86 9.63 10.91
Period End Totals
Total assets $ 1,545,367 $ 1,379,517 $ 1,343,249 $ 1,335,633 $ 1,330,854
Available-for-sale securities 188,626 201,587 219,708 238,780 263,259
Loans held for sale 1,761 6,770 2,525 2,073 7,472
Total loans & leases 1,180,591 1,046,735 1,000,212 962,075 822,714
Allowance for credit losses 16,114 15,096 15,786 13,818 13,805
Total deposits 1,307,244 1,152,605 1,070,205 1,086,665 1,113,045
Advances from FHLB 35,000 35,000 83,600 60,000 5,500
Trust preferred securities 10,310 10,310 10,310 10,310 10,310
Subordinated debt, net 19,739 19,690 19,642 19,594 19,546
Total equity 141,236 127,508 124,342 118,428 144,929
1 Cash dividends on common shares divided by net income available to common.

Critical Accounting Policies and Estimates

The accounting and reporting policies of the Company are in accordance with U.S. GAAP and conform to general practices within the banking industry. The Company's significant accounting policies are described in detail in the Notes to the Company's Consolidated Financial Statements for the years ended December 31, 2025, and 2024. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions. The Company's financial position and results of operations can be affected by these estimates and assumptions and are integral to the understanding of reported results. Critical accounting policies are those policies that management believes are the most important to the portrayal of the Company's financial condition and results, and they require management to make estimates that are difficult, subjective or complex.

Allowance for Credit Losses: The Company believes the determination of the ACL involves a higher degree of judgment and complexity than its other significant accounting policies. The ACL is calculated with the objective of maintaining a reserve level believed by management to be sufficient to absorb estimated credit losses over the life of an asset or an off-balance sheet credit exposure. Management's determination of the adequacy of the ACL is based on periodic evaluations of past events, including historical credit loss experience on financial assets with similar risk characteristics, current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the financial assets. However, this evaluation has subjective components requiring material estimates, including expected default probabilities, the expected loss given default, the amounts and timing of expected future cash flows on individually evaluated loans, and estimated losses based on historical loss experience and forecasted economic conditions. All of these factors may be susceptible to significant change. To the extent that actual results differ from management estimates, additional provisions for credit losses may be required that would adversely impact earnings in future periods.

Goodwill and Other Intangibles: The Company records all assets and liabilities acquired in purchase acquisitions, including goodwill and other intangibles, at fair value as required. Goodwill is subject, at a minimum, to annual tests for impairment. Other intangible assets are amortized over their estimated useful lives using straight-line and accelerated methods, and are subject to impairment if events or circumstances indicate a possible inability to realize the carrying amount. The initial goodwill and other intangibles recorded and subsequent impairment analysis requires management to make subjective judgments concerning estimates of how the acquired asset will perform in the future. Events and factors that may significantly affect the estimates include, among others, customer attrition, changes in revenue growth trends, specific industry conditions and changes in competition.

Income Taxes: Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. Realization of deferred tax assets is dependent upon the generation of a sufficient level of future taxable income and recoverable taxes paid in prior years. Although realization is not assured, management believes it is more likely than not that all of the deferred tax assets will be realized. The Company recognizes interest and/or penalties related to income tax matters in income tax expense.

An effective tax rate of 21% is used to determine after-tax components of other comprehensive income (loss) included in the statements of shareholders' equity.

A tax position is recognized as a benefit only if it is "more likely than not" that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the "more likely than not" test, no tax benefit is recorded.

Changes in Financial Condition

Total assets at December 31, 2025, were $1.55 billion, compared to $1.38 billion at December 31, 2024. Loans (excluding loans held for sale) were $1.18 billion at December 31, 2025, compared to $1.05 billion at December 31, 2024. Total deposits were $1.31 billion at December 31, 2025, compared to $1.15 billion at December 31, 2024. The Company continued to allocate the reductions in our bond portfolio, from scheduled amortization, into higher yielding loan balances.

The following are the condensed average balance sheets of the Company for the years ending December 31, which include the interest earned or paid, and the average interest rate, on each asset and liability:

2025 2024 2023
($ in thousands) Average Average Average Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate
Assets
Taxable securities/cash $ 196,831 $ 4,495 2.28 % $ 247,026 $ 5,490 2.22 % $ 254,133 $ 6,092 2.40 %
Non-taxable securities 6,243 144 2.31 % 6,393 146 2.28 % 7,181 170 2.37 %
Overnight Cash 87,283 3,840 4.40 % 43,171 1,354 3.14 % - - 0.00 %
Loans, net1 1,108,531 65,441 5.90 % 1,014,375 57,359 5.65 % 985,217 51,890 5.27 %
Total earning assets 1,398,888 73,920 5.28 % 1,310,965 64,349 4.91 % 1,246,531 58,152 4.67 %
Cash and due from banks 5,390 4,388 4,035
Allowance for credit losses (15,631 ) (15,536 ) (15,478 )
Premises and equipment 21,624 20,929 22,990
Other assets 89,052 40,528 76,566
Total assets $ 1,499,323 $ 1,361,274 $ 1,334,644
Liabilities
Savings and interest-bearing demand deposits $ 742,153 $ 13,092 1.76 % $ 643,710 $ 11,073 1.72 % $ 619,906 $ 7,599 1.23 %
Time deposits 273,228 9,398 3.44 % 259,818 9,962 3.83 % 236,665 7,109 3.00 %
Repurchase agreements & other 12,085 95 0.79 % 14,336 154 1.07 % 15,765 74 0.47 %
Advances from FHLB 35,011 1,467 4.19 % 39,092 1,721 4.40 % 55,044 2,603 4.73 %
Trust preferred securities 10,310 637 6.18 % 10,310 739 7.17 % 10,310 716 6.94 %
Subordinated debt 19,713 778 3.95 % 19,655 778 3.96 % 19,616 778 3.97 %
Total interest-bearing liabilities 1,092,500 25,467 2.33 % 986,921 24,427 2.48 % 957,306 18,879 1.97 %
Demand deposits 251,820 227,445 237,976
Other liabilities 20,397 22,156 21,047
Total liabilities 1,364,717 1,236,522 1,216,329
Shareholders' equity 134,606 124,742 118,315
Total liabilities and shareholders' equity $ 1,499,323 $ 1,361,264 $ 1,334,644
Net interest income (tax equivalent basis) $ 48,453 $ 39,922 $ 39,273
Net interest income as a percent of average interest-earning assets - GAAP measure 3.46 % 3.05 % 3.15 %
Net interest income as a percent of average
interest-earning assets - Non-GAAP measure 2 3.47 % 3.06 % 3.16 %
-- Computed on a fully tax equivalent basis (FTE)
1 Nonaccruing loans and loans held for sale are included in the average balances.
2 Interest on tax exempt securities and loans is computed on a tax equivalent basis using a 21 percent statutory tax rate, and added to the net interest income. The tax equivalent adjustment was $0.13, $0.14 and $0.14 million in 2025, 2024 and 2023, respectively.

The following table sets forth the effect of volume and rate changes on interest income and expense for the periods indicated. For purposes of these tables, changes in interest due to volume and rate were determined as follows:

● Volume variance - change in volume multiplied by the previous year's rate.
● Rate variance - change in rate multiplied by the previous year's volume.
● Rate/volume variance - change in volume multiplied by the change in rate. This variance allocates the volume variance and rate variance in proportion to the relationship of the absolute dollar amount of the change in each.
Total
Variance Variance Attributable To
($ in thousands) 2025/2024 Volume Rate
Interest income
Taxable securities $ (995 ) $ (1,116 ) $ 121
Overnight Cash 2,486 1,384 1,102
Non-taxable securities1 (2 ) (3 ) 1
Loans, net of unearned income and deferred fees1 8,082 5,324 2,758
Total interest income 9,571 5,589 3,982
Interest expense
Savings and interest-bearing demand deposits 2,019 1,693 326
Time deposits (564 ) 514 (1,078 )
Repurchase agreements & other (59 ) (24 ) (35 )
Advances from FHLB (254 ) (180 ) (74 )
Trust preferred securities (102 ) - (102 )
Subordinated debt - - -
Total interest expense 1,040 2,003 (963 )
Net interest income $ 8,531 $ 3,586 $ 4,945
1 Interest on non-taxable securities and loans has been adjusted to fully tax equivalent

The maturity distribution and weighted-average interest rates of debt securities available-for-sale at December 31, 2025, are set forth in the table below. The weighted-average interest rates are based on coupon rates for securities purchased at par value and on effective interest rates considering amortization or accretion for securities purchased at a premium or discount:

Maturing
Weighted Weighted Weighted Weighted Weighted
Within Average 1-5 Average 5-10 Average After Average Average
($ in thousands) 1 Year Yield Years Yield Years Yield 10 Years Yield Total Yield
Available-for-sale:
U.S. Treasury and Government agencies $ - $ 782 3.51 % $ 4,421 1.46 % - $ 5,203 1.77 %
Mortgage-backed securities - 17,044 1.38 % 16,041 1.78 % 126,867 1.89 % 159,952 1.82 %
State and political subdivisions 275 4.99 % 1,119 3.82 % 2,461 3.72 % 5,994 2.35 % 9,849 2.93 %
Other corporate securities - - 13,622 3.64 % - 13,622 3.64 %
Total securities by maturity $ 275 4.99 % $ 18,945 1.61 % $ 36,545 2.57 % $ 132,861 1.91 % $ 188,626 2.01 %
($ in thousands) Years Ended December 31,
Total loans 2025 2024 % Change
Commercial business & agriculture $ 190,942 $ 189,298 0.9 %
Commercial real estate 596,983 479,573 24.5 %
Residential real estate 304,741 308,378 -1.2 %
Consumer & other 88,475 69,340 27.6 %
Total loans 1,181,141 1,046,589 12.9 %
Net deferred costs (fees) (550 ) 146 -476.7 %
Total loans, net deferred costs (fees) 1,180,591 1,046,735 12.8 %
Loans held for sale $ 1,761 $ 6,770 -74.0 %
Total deposits 2025 2024 % Change
Noninterest bearing demand $ 254,063 $ 232,155 9.4 %
Interest-bearing demand 202,501 201,085 0.7 %
Savings & money market 577,380 460,148 25.5 %
Time deposits 273,300 259,217 5.4 %
Total deposits 1,307,244 1,152,605 13.4 %
Total shareholders' equity $ 141,236 $ 127,508 10.8 %

Loans held for investment ("HFI") increased $133.9 million, or 12.8 percent, to $1.18 billion at December 31, 2025, which was due to an increase in commercial real estate and agricultural lending during 2025. The Company allowed its residential real estate portfolio to amortize with minimal new production generated on the balance sheet during 2025.

Concentrations of Credit Risk: The Company makes commercial, real estate and installment loans to customers located mainly in the Tri-State region of Ohio, Indiana and Michigan. Commercial loans are expected to be repaid from cash flow from operations of businesses and include loans collateralized by commercial real estate, business assets and, in the case of agricultural loans, crops and farm equipment. As of December 31, 2025, commercial business and agricultural loans made up approximately 16.1 percent of the HFI loan portfolio while commercial real estate loans accounted for approximately 50.6 percent of the HFI loan portfolio. As of December 31, 2025, residential first mortgage loans, which are secured by first mortgages on residential real estate, made up approximately 25.8 percent of the HFI portfolio, while consumer loans to individuals, which are primarily secured by consumer assets, made up approximately 7.5 percent of the HFI loan portfolio.

Maturities and Sensitivities of Loans to Changes in Interest Rates:The following table shows the maturity distribution of loans outstanding as of December 31, 2025. The amounts have been categorized between loans with a fixed or floating interest rate (floating rate loans have an adjustable interest rate that changes based on a rate index).

Maturities and Sensitivities of Loans to Changes in Interest Rates

As of December 31, 2025

($ in thousands) Within one year After one, but within five years After five, but within fifteen years After fifteen years Total
Loans with fixed interest rates:
Commercial & industrial $ 1,137 $ 30,979 $ 13,017 $ 15 $ 45,148
Commercial real estate - owner occupied 3,803 7,395 5,418 - 16,616
Commercial real estate - nonowner occupied 5,585 62,637 2,268 201 70,691
Agricultural 1,264 4,873 6,093 1,558 13,788
Residential real estate 2,819 885 10,824 31,459 45,987
HELOC 2 3 150 153 308
Consumer 3,699 7,206 2,889 499 14,293
Total $ 18,309 $ 113,978 $ 40,659 $ 33,885 $ 206,831
Loans with floating interest rates:
Commercial & industrial $ 22,405 $ 12,939 $ 31,306 $ 2,080 $ 68,730
Commercial real estate - owner occupied 11,087 15,961 57,416 60,006 144,470
Commercial real estate - nonowner occupied 12,176 99,865 109,650 143,515 365,206
Agricultural 4,547 3,322 22,375 32,482 62,726
Residential real estate 1,118 1,678 7,429 248,529 258,754
HELOC 22 364 43,041 25,438 68,865
Consumer 877 2,911 1,221 - 5,009
Total $ 52,232 $ 137,040 $ 272,438 $ 512,050 $ 973,760
Total loans:
Commercial & industrial $ 23,542 $ 43,918 $ 44,323 $ 2,095 $ 113,878
Commercial real estate - owner occupied 14,890 23,356 62,834 60,006 161,086
Commercial real estate - nonowner occupied 17,761 162,502 111,918 143,716 435,897
Agricultural 5,811 8,195 28,468 34,040 76,514
Residential real estate 3,937 2,563 18,253 279,988 304,741
HELOC 24 367 43,191 25,591 69,173
Consumer 4,576 10,117 4,110 499 19,302
Total loans $ 70,541 $ 251,018 $ 313,097 $ 545,935 $ 1,180,591

Total deposits increased $154.6 million, or 13.4 percent, to $1.31 billion at December 31, 2025. Inclusive of that growth was approximately $47 million in acquired deposits.

The average amount of deposits and weighted-average rates paid are summarized as follows for the years ended December 31:

2025 2024 2023
Average Average Average Average Average Average
($ in thousands) Amount Rate Amount Rate Amount Rate
Savings and interest bearing demand deposits $ 742,153 1.76 % $ 643,710 1.72 % $ 619,906 1.23 %
Time deposits 273,228 3.44 % 259,818 3.83 % 236,665 3.00 %
Non interest bearing demand deposits 251,820 - 227,445 - 237,976 -
Totals $ 1,267,201 1.77 % $ 1,130,973 1.86 % $ 1,094,547 1.35 %

Time deposits that exceeded the FDIC insurance limit of $250,000 are summarized as follows:

($ in thousands) 2025 2024
Three months or less $ 6,813 $ 4,912
Over three months through six months 8,420 7,249
Over six months and through twelve months 3,370 6,533
Over twelve months 5,258 4,750
Total $ 23,861 $ 23,444

Shareholders' equity at December 31, 2025, was $141.2 million, or 9.1 percent of total assets compared to $127.5 million or 9.2 percent of total assets, at December 31, 2024. Retained earnings increased during the year due to earnings of $14.0 million less dividends paid to common shareholders of $3.8 million and repurchases of Company common shares of $5.4 million. The fair market value of the bond portfolio increased during 2025 due to the valuation adjustment on the portfolio, which resulted in accumulated other comprehensive loss ("AOCI") declining to $21.5 million at December 31, 2025, from $30.2 million at December 31, 2024.

The Company continued to repurchase its own common shares during the year under the Company's publicly announced share repurchase program. Specifically, the Company repurchased 283,490 shares during 2025 at an average price of $19.47 per share. On December 18, 2024, the Company's Board of Directors approved a share repurchase program authorizing the repurchase of 500,000 shares through December 31, 2026. As of December 31, 2025, the Company had repurchased a total of 300,950 shares, and 199,050 shares remained available for purchase, under this program.

Asset Quality Years Ended December 31,
($ in thousands) 2025 2024 % Change
Nonaccruing loans $ 4,579 $ 5,516 -17.0 %
Foreclosed assets and other assets held for sale, net 104 - N/M
Nonperforming assets 4,683 5,516 -15.1 %
Net charge-offs/(recoveries) 261 250 4.4 %
Provision for credit losses 1,306 124 953.2 %
Allowance for credit losses 16,114 15,096 6.7 %
Nonaccruing loans/total loans 0.39 % 0.53 % -26.4 %
Allowance/nonaccruing loans 351.9 % 273.7 % 28.6 %
Nonperforming assets/total assets 0.30 % 0.40 % -24.2 %
Net charge offs/average loans 0.02 % 0.01 % 100.0 %
Allowance/loans 1.36 % 1.44 % -5.4 %
Allowance/nonperforming loans 351.9 % 273.7 % 28.6 %

Nonperforming assets totaled $4.7 million, or 0.30 percent of total assets, at December 31, 2025, a decrease of $0.8 million, or 15.1 percent, from December 31, 2024. The Company had total net charge-offs on loans of $261,000 in 2025, as compared to net charge-offs of $250,000 in 2024. The Company's ACL at December 31, 2025, now covers nonperforming loans at 351.9 percent, up from 273.7 percent at December 31, 2024.

The following schedule presents an analysis of the ACL, average loan data and related ratios at December 31 for the years indicated:

($ in thousands) Provision for
Credit Losses 		Net (Chargeoffs)
Recoveries 		Average Loans Ratio of
annualized net
(chargeoffs)
recoveries to
average loans
December 31, 2025
Commercial & industrial $ (673 ) $ (177 ) $ 120,891 -0.15 %
Commercial real estate - owner occupied 427 - 142,734 0.00 %
Commercial real estate - nonowner occupied 1,123 2 386,153 0.00 %
Agricultural (576 ) - 63,260 0.00 %
Residential real estate 617 (16 ) 311,773 -0.01 %
HELOC 154 (1 ) 60,770 0.00 %
Consumer 202 (69 ) 14,760 -0.47 %
Total $ 1,274 $ (261 ) $ 1,100,341 -0.02 %
December 31, 2024
Commercial & industrial $ 891 $ (228 ) $ 123,238 -0.19 %
Commercial real estate - owner occupied (146 ) - 131,168 0.00 %
Commercial real estate - nonowner occupied 3 - 311,855 0.00 %
Agricultural 444 - 63,580 0.00 %
Residential real estate (1,603 ) (3 ) 314,066 0.00 %
HELOC 10 - 50,240 0.00 %
Consumer (39 ) (19 ) 13,204 -0.14 %
Total $ (440 ) $ (250 ) $ 1,007,351 -0.02 %
December 31, 2023
Commercial & industrial $ 110 $ - $ 124,435 0.00 %
Commercial real estate - owner occupied 202 - 118,583 0.00 %
Commercial real estate - nonowner occupied 119 - 301,072 0.00 %
Agricultural 23 - 59,720 0.00 %
Residential real estate 190 (52 ) 313,034 -0.02 %
HELOC 39 - 46,576 0.00 %
Consumer 5 (40 ) 15,470 -0.26 %
Total $ 688 $ (92 ) $ 978,890 -0.01 %

The ACL balance and the provision for credit losses are determined by management based upon periodic reviews of the loan portfolio. In addition, management considers the level of charge offs on loans, as well as the fluctuations of charge offs and recoveries on loans, in the factors which caused these changes. Estimating the risk of loss and the amount of loss is necessarily subjective. Accordingly, the allowance is maintained by management at a level considered adequate to cover losses that are currently anticipated based on past loss experience, economic conditions, information about specific borrower situations, including their financial position and collateral values, and other factors and estimates which are subject to change over time.

The Company has substantially increased its reserve level over the last several years. Specifically, the Company's ACL balance has increased from $12.6 million at December 31, 2020, to $16.1 million at December 31, 2025, which reflects an increase of $3.5 million, or 28 percent. This increase was the result of $2.8 million in provision expense during the period and $0.4 million in net charge-offs over the five-year period. The reserve increased during 2023 due to the one-time CECL adjustment of $1.4 million taken in January of 2023 upon the Company's adoption of the CECL methodology.

The following schedule provides a breakdown of the ACL allocated by type of loan and related ratios at December 31 for the years indicated:

Percentage Percentage Percentage
of Loans of Loans of Loans
In Each In Each In Each
Category Category Category
Allowance to Total Allowance to Total Allowance to Total
Amount Loans Amount Loans Amount Loans
($ in thousands) 2025 2024 2023
Commercial & industrial $ 1,821 11.3 % $ 2,666 17.7 % $ 2,003 12.7 %
Commercial real estate - owner occupied 2,233 13.9 % 1,806 12.0 % 1,952 12.4 %
Commercial real estate - nonowner occupied 6,846 42.5 % 5,721 37.9 % 5,718 36.2 %
Agricultural 308 1.9 % 884 5.9 % 440 2.8 %
Residential real estate 3,931 24.4 % 3,330 22.1 % 4,936 31.3 %
HELOC 673 4.2 % 520 3.4 % 510 3.2 %
Consumer 302 1.9 % 169 1.1 % 227 1.4 %
$ 16,114 100.0 % $ 15,096 100.0 % $ 15,786 100.0 %

Regulatory capital reporting is required for State Bank only, as the Company is currently exempt from quarterly regulatory capital level measurement pursuant to the Small Bank Holding Company Policy Statement. As of December 31, 2025, State Bank met all regulatory capital levels required to be considered well-capitalized (see Note 16 to the Consolidated Financial Statements).

On May 27, 2021, the Company issued and sold $20.0 million in aggregate principal amount of its 3.65% Fixed to Floating Rate Subordinated Notes due 2031 in a private placement exempt from the registration requirements under the Securities Act. The Subordinated Notes bear interest at a fixed rate of 3.65% through May 31, 2026. From June 1, 2026 to the maturity date or earlier redemption of the Subordinated Notes, the interest rate will reset quarterly to an interest rate per annum, equal to the then-current-three-month Secured Overnight Financing Rate ("SOFR") provided by the Federal Reserve Bank of New York plus 296 basis points. The Subordinated Notes have a maturity of 10 years.

Earnings Summary - 2025 vs. 2024

Net income for 2025 was $14.0 million, or $2.19 per diluted common share, compared with net income of $11.5 million, or $1.72 per diluted common share, for 2024. State Bank reported net income for 2025 of $15.9 million, which was up from the $13.0 million of net income in 2024. SBFG Title reported net income for 2025 of $0.58 million, which was up from net income of $0.36 million for 2024.

Positive results for 2025 included loan growth of $133.9 million, with deposits higher by $154.6 million. Loan and deposit growth were supplemented by our acquisition of The Marblehead Bank in the first quarter of 2025, adding $18 million and $47 million of loans and deposits, respectively. Residential real estate loan production was $277.7 million, with $5.0 million of revenue from gains on sale. The level of mortgage origination was up from the $261.3 million in 2024. The Company's loans serviced for others ended the year at $1.48 billion, up from $1.43 billion at December 31, 2024.

Operating revenue was higher at $65.6 million in 2025, compared to $56.9 million in 2024 as balance sheet growth and margin improvement drove net interest income higher, supplemented by higher mortgage revenues. SBFG Title revenue expanded by $0.4 million compared to the prior year.

Operating expense increased by $4.0 million, or 9.4 percent, from $43.0 million in 2024 to $47.0 million in 2025, due to higher incentive and commission levels. Operating expense included conversion expenses of $0.8 million and almost a full year of Marblehead operations.

Results of Operations

Years Ended December 31,
($ in thousands, except per share data) 2025 2024 % Change
Total assets $ 1,545,367 $ 1,379,517 12.0 %
Total investments 188,626 201,588 -6.4 %
Loans held for sale 1,761 6,770 -74.0 %
Loans, net of unearned income 1,180,591 1,046,735 12.8 %
Allowance for credit losses 16,114 15,096 6.7 %
Total deposits 1,307,244 1,152,605 13.4 %
Total operating revenue1 $ 65,560 $ 56,939 15.1 %
Net interest income 48,453 39,922 21.4 %
Loan loss provision 1,306 124 953.2 %
Noninterest income 17,107 17,017 0.5 %
Noninterest expense 46,999 42,959 9.4 %
Net income 13,974 11,470 21.8 %
Diluted earnings per share 2.19 1.72 27.3 %
1 Operating revenue equals net interest income plus noninterest income.

Net interest income was $48.4 million for 2025 and increased by 21 percent from net interest income of $40.0 million for 2024. Average earning assets increased to $1.40 billion in 2025, compared to $1.31 billion in 2024, primarily due to the increase in our loan portfolio, with higher overnight cash offset by lower securities. The consolidated 2025 full year net interest margin on a fully-taxable equivalent ("FTE") basis was 3.47 percent compared to 3.06 percent for the full year of 2024.

Provision for credit losses was taken in 2025 in the amount of $1.31 million compared to $0.12 million taken during 2024. For 2025, net charge-offs totaled $0.26 million, or 0.02 percent of average loans, compared to net charge-offs of $0.25 million, or 0.02 percent of average loans, for 2024.

Noninterest Income Years Ended December 31,
($ in thousands) 2025 2024 % Change
Wealth management fees $ 3,535 $ 3,511 0.7 %
Customer service fees 3,544 3,467 2.2 %
Gains on sale of residential loans & OMSR's 5,015 4,564 9.9 %
Mortgage loan servicing fees, net 1,562 2,183 28.4 %
Gain on sale of non-mortgage loans 143 146 -2.1 %
Title insurance income 2,048 1,635 25.3 %
Other 1,260 1,511 -16.6 %
Total noninterest income $ 17,107 $ 17,017 0.5 %

Total noninterest income was $17.1 million for 2025 compared to $17.0 million for 2024, representing an increase of $0.17 million, or 0.5 percent, year-over-year. Gains on sale of residential mortgage loans was up from 2024 by $0.45 million, or 9.9 percent. The Company sold $250.4 million of originated mortgages into the secondary market in 2025, which due to being higher than the amortization on the serviced portfolio, increased the size of our serviced loan portfolio to $1.48 billion at December 31, 2025 from $1.43 billion at December 31, 2024. Sales of non-mortgage loans (small business and farm credits) in 2025 was just $1.0 million, resulting in gain on sale of $0.14 million. The Company saw its wealth management assets under management increase by $18.3 million to $566.0 million at December 31, 2025, with total wealth management fees of $3.5 million.

Noninterest Expense Years Ended December 31,
($ in thousands) 2025 2024 % Change
Salaries & employee benefits $ 25,077 $ 23,603 6.2 %
Net occupancy expense 3,309 2,884 14.7 %
Equipment expense 4,535 4,333 4.7 %
Data processing fees 3,840 3,075 24.9 %
Professional fees 3,594 2,927 22.8 %
Marketing expense 651 821 -20.7 %
Telephone and communications 511 525 -2.7 %
Postage and delivery expense 541 447 21.0 %
State, local and other taxes 1,091 907 20.3 %
Employee expense 763 733 4.1 %
Other expense 3,087 2,704 14.2 %
Total noninterest expense $ 46,999 $ 42,959 9.4 %

Total noninterest expense was $47.0 million for 2025 compared to $43.0 million for 2024, representing a $4.0 million, or 9.4 percent, increase year-over-year. Included in the 2025 expense levels are $0.8 million in one-time conversion expenses and almost a full year of Marblehead operations. Total full-time equivalent employees ended 2025 at 252, which was flat from year end 2024.

Earnings Summary - 2024 vs. 2023

Net income for 2024 was $11.5 million, or $1.72 per diluted common share, compared with net income of $12.1 million, or $1.75 per diluted common share, for 2023. State Bank reported net income for 2024 of $13.0 million, which was down slightly from the $13.3 million of net income in 2023. SBFG Title reported net income for 2024 of $0.36 million, which was up from net income of $0.24 million for 2023.

Positive results for 2024 included loan growth of $46.5 million, with deposits higher by $82.4 million. Deposit growth was boosted by the Company's participation in the State of Ohio's Homebuyer Plus program. For the full year of 2024, residential real estate loan production was $261.3 million, with $4.6 million of revenue from gains on sale. The level of mortgage origination was up from the $215.5 million in 2023. The Company's loans serviced for others ended the year at $1.427 billion, up slightly from $1.367 billion at December 31, 2023.

Operating revenue for 2024 was steady at $57.0 million, as increased mortgage volume offset the sale of Visa B shares that occurred in 2023 of $1.4 million. SBFG Title revenue also remained level at $1.64 million.

Operating expense increased by $1.0 million, or 2.4 percent, from $42.0 million in 2023 to $43.0 million in 2024, due to higher incentive and commission levels, which were partially offset by moving higher medical costs to SB Captive.

Goodwill, Intangibles and Capital Purchases

The Company completed its most recent annual goodwill impairment review as of December 31, 2025. Due to declines in the Company's share price, a quantitative evaluation of goodwill was completed as of September 30, 2024, which revealed that impairment was not warranted. No triggering events have occurred since that assessment, which would warrant impairment. At December 31, 2025, the Company concluded that it was more likely than not that the fair value of the reporting unit exceeded its carrying value, resulting in no impairment. The Company's goodwill is further discussed in Note 6 to the Consolidated Financial Statements.

Management plans to continue from time to time to purchase additional premises and equipment and improve current facilities to meet the current and future needs of the Company's customers. These purchases will include buildings, leasehold improvements, furniture and equipment. Management expects that cash on hand and cash generated from current operations will fund these capital expenditures and purchases.

Liquidity

Liquidity relates primarily to the Company's ability to fund loan demand, meet deposit customers' withdrawal requirements and provide for operating expenses. Sources used to satisfy these needs consist of cash and due from banks, interest-bearing deposits in other financial institutions, securities available-for-sale, loans held for sale, and borrowings from various sources. These assets, excluding the borrowings, are commonly referred to as liquid assets. Liquid assets were $263.1 million at December 31, 2025, which included pledged available-for-sale securities of $141.2 million, compared to liquid assets of $235.9 million at December 31, 2024.

The Company does not have material cash requirements for capital expenditures over the next year. Any cash needs for capital requirements would be funded by cash existing at the Company.

The Company's commercial real estate, first mortgage residential, agricultural and multi-family mortgage portfolio of $978.2 million at December 31, 2025, can and is readily used to collateralize borrowings, which is an additional source of liquidity. Management believes the Company's current liquidity level, without these borrowings, is sufficient to meet its current and anticipated liquidity needs. At December 31, 2025, all eligible commercial real estate, residential first, multi-family mortgage and agricultural loans were pledged under a FHLB blanket lien.

Significant additional off balance-sheet liquidity is available in the form of FHLB advances, unused federal funds lines from correspondent banks and the national certificate of deposit market. Management expects the risk of changes in off-balance-sheet arrangements to be immaterial to earnings. Based on the current collateralization requirements of the FHLB, approximately $159.9 million of additional borrowing capacity existed at December 31, 2025.

At December 31, 2025, and 2024, the Company had $41.0 million in federal funds lines available. The Company also had $47.4 million in unpledged securities at December 31, 2025, available for additional borrowings.

The cash flow statements for the periods presented provide an indication of the Company's sources and uses of cash as well as an indication of the ability of the Company to maintain an adequate level of liquidity. A discussion of the cash flow statements for 2025 and 2024 follows:

The Company experienced positive cash flows from operating activities in 2025 and 2024. Net cash from operating activities was $24.0 million and $9.5 million for the years ended December 31, 2025, and 2024, respectively. Significant operating items for 2025 included gain on sale of loans of $5.2 million and net income of $14.0 million. Cash provided by the sale of loans held for sale was $251.7 million. Cash used in the origination of loans held for sale were $244.0 million.

The Company experienced negative cash flows from investing activities in 2025 and 2024. Net cash used in investing activities was $68.1 million and $28.9 million for the years ended December 31, 2025, and 2024, respectively. A net increase in loans of $115.6 million was the primary change in 2025. The primary change for 2024 was a net increase in loans of $46.8 million. The Company had proceeds from repayments, maturities, sales and calls of securities of $53.8 million and $18.8 million in 2025 and 2024, respectively.

The Company experienced positive cash flows from financing activities in 2025 and 2024. Net cash provided by financing activities was $89.7 million and $22.5 million for the years ended December 31, 2025, and 2024, respectively. The increase in deposits of $101.6 million and $82.4 million attributed to the positive cash flows in 2025 and 2024, respectively.

The Company uses an Economic Value of Equity ("EVE") analysis to measure risk in the balance sheet incorporating all cash flows over the estimated remaining life of all balance sheet positions. The EVE analysis calculates the net present value of the Company's assets and liabilities in rate shock environments that range from -400 basis points to +400 basis points. The results of this analysis are reflected in the following table, which reflects the Company's neutral balance sheet that directionally is trending to a liability sensitive position:

Economic Value of Equity
December 31, 2025
($ in thousands)
Change in rates $ Amount $ Change % Change
+400 basis points $ 287,836 $ 29,143 11.27 %
+300 basis points 283,095 24,402 9.43 %
+200 basis points 275,227 16,534 6.39 %
+100 basis points 267,386 8,693 3.36 %
Base Case 258,693 - -
-100 basis points 245,130 (13,563 ) -5.24 %
-200 basis points 226,992 (31,701 ) -12.25 %
-300 basis points 206,265 (52,428 ) -20.27 %
-400 basis points 212,241 (46,452 ) -17.96 %
Economic Value of Equity
December 31, 2024
($ in thousands)
Change in rates $ Amount $ Change % Change
+400 basis points $ 258,979 $ 10,652 4.29 %
+300 basis points 258,247 9,920 3.99 %
+200 basis points 253,713 5,386 2.17 %
+100 basis points 250,545 2,218 0.89 %
Base Case 248,327 - -
-100 basis points 240,798 (7,529 ) -3.03 %
-200 basis points 229,540 (18,787 ) -7.57 %
-300 basis points 213,379 (34,948 ) -14.07 %
-400 basis points 190,188 (58,139 ) -23.41 %

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

Asset liability management involves developing, executing and monitoring strategies to maintain appropriate liquidity, maximizing net interest income and minimizing the impact that significant fluctuations in market interest rates would have on current and future earnings. The business of the Company and the composition of its balance sheet consist of investments in interest-earning assets (primarily loans, mortgage-backed securities, and securities available-for-sale) which are primarily funded by interest-bearing liabilities (deposits and borrowings). With the exception of specific loans which are originated and held for sale, all of the financial instruments of the Company are for other than trading purposes. All of the Company's transactions are denominated in U.S. dollars with no specific foreign exchange exposure. In addition, the Company has limited exposure to commodity prices related to agricultural loans. The impact of changes in foreign exchange rates and commodity prices on interest rates are assumed to be insignificant. The Company's financial instruments have varying levels of sensitivity to changes in market interest rates resulting in market risk. Interest rate risk is the Company's primary market risk exposure; to a lesser extent, liquidity risk also impacts market risk exposure.

Interest rate risk is the exposure of a banking institution's financial condition and results to adverse movements in interest rates. Accepting this risk can be an important source of profitability and shareholder value; however, excessive levels of interest rate risk could pose a significant threat to the Company's earnings and capital base. Accordingly, effective risk management that maintains interest rate risks at prudent levels is essential to the Company's safety and soundness.

Evaluating a financial institution's exposure to changes in interest rates includes assessing both the adequacy of the management process used to control interest rate risk and the organization's quantitative level of exposure. When assessing the interest rate risk management process, the Company seeks to ensure that appropriate policies, procedures, management information systems and internal controls are in place to maintain interest rate risks at prudent levels of consistency and continuity. Evaluating the quantitative level of interest rate risk exposure requires the Company to assess the existing and potential future effects of changes in interest rates on its consolidated financial condition, including capital adequacy, earnings, liquidity and asset quality (when appropriate).

The FRB together with the OCC and the FDIC adopted a Joint Agency Policy Statement on interest rate risk effective June 26, 1996. The policy statement provides guidance to examiners and bankers on sound practices for managing interest rate risk, which will form the basis for ongoing evaluation of the adequacy of interest rate risk management at supervised institutions. The policy statement also outlines fundamental elements of sound management that have been identified in prior Federal Reserve guidance and discusses the importance of these elements in the context of managing interest rate risk. Specifically, the guidance emphasizes the need for active board of director and senior management oversight and a comprehensive risk management process that effectively identifies, measures and controls interest rate risk.

Financial institutions derive their income primarily from the excess of interest collected over interest paid. The rates of interest an institution earns on its assets and owes on its liabilities generally are established contractually for a period of time. Since market interest rates change over time, an institution is exposed to lower profit margins (or losses) if it cannot adapt to interest rate changes. For example, assume that an institution's assets carry intermediate or long-term fixed rates and that those assets are funded with short-term liabilities. If market interest rates rise by the time the short-term liabilities must be refinanced, the increase in the institution's interest expense on its liabilities may not be sufficiently offset if assets continue to earn at the long-term fixed rates. Accordingly, an institution's profits could decrease on existing assets because the institution will either have lower net interest income or possibly, net interest expense. Similar risks exist when assets are subject to contractual interest rate ceilings, or rate-sensitive assets are funded by longer-term, fixed-rate liabilities in a declining rate environment.

There are several ways an institution can manage interest rate risk including: 1) matching repricing periods for new assets and liabilities, for example, by shortening or lengthening terms of new loans, investments, or liabilities; 2) selling existing assets or repaying certain liabilities; and 3) hedging existing assets, liabilities, or anticipated transactions. An institution might also invest in more complex financial instruments intended to hedge or otherwise change interest rate risk. Interest rate swaps, futures contracts, options on futures contracts, and other such derivative financial instruments can be used for this purpose. Because these instruments are sensitive to interest rate changes, they require management's expertise to be effective. The Company has not purchased derivative financial instruments in the past, but during 2025 and 2024 the Company entered into interest rate swap agreements as an accommodation to certain loan customers (see Note 8 to the Consolidated Financial Statements). The Company may purchase such instruments in the future if market conditions are favorable.

The Company manages its interest rate risk by the employment of strategies to assure that desired levels of both interest-earning assets and interest-bearing liabilities mature or reprice with similar time frames. Such strategies include: 1) loans receivable which are renewed (and repriced) annually, 2) variable rate loans, 3) certificates of deposit with terms from one month to six years, 4) securities available-for-sale which mature at various times primarily from one through ten years, 5) federal funds borrowings with terms of one day to 90 days, and 6) FHLB borrowings with terms of one day to ten years.

Management believes the most significant impact on financial results is the Company's ability to react to changes in interest rates. Management seeks to maintain an essentially balanced position between interest sensitive assets and liabilities and actively manages loan, security, and liability maturities in order to protect against the effects of wide interest rate fluctuations on net income and shareholders' equity.

For additional quantitative and qualitative information regarding the Company's interest rate risk, refer to the section captioned "Liquidity" under Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operationsin this Form 10-K, which is incorporated herein by reference.

Item 8. Financial Statements and Supplementary Data.

Our Consolidated Financial Statements and Notes thereto and other supplementary data follow.

Index to Consolidated Financial Statements

Page
Consolidated Balance Sheets as of December 31, 2025, and 2024 F-2
Consolidated Statements of Income for the Years ended December 31, 2025, and 2024 F-3
Consolidated Statements of Comprehensive Income for the Years ended December 31, 2025, and 2024 F-4
Consolidated Statements of Shareholders' Equity for the Years ended December 31, 2025, and 2024 F-5
Consolidated Statements of Cash Flows for the Years ended December 31, 2025, and 2024 F-6
Notes to Consolidated Financial Statements F-7
Report of Independent Registered Public Accounting Firm (Forvis Mazars, LLP) (PCAOB ID: 686) F-44

F-1

SB Financial Group, Inc.

Consolidated Balance Sheets

at December 31,

($ in thousands)
2025 2024
Assets
Cash and due from banks $ 71,543 $ 25,928
Interest bearing time deposits 1,140 1,565
Available-for-sale securities 188,626 201,587
Loans held for sale 1,761 6,770
Loans, net of unearned income 1,180,591 1,046,735
Allowance for credit losses (16,114 ) (15,096 )
Premises and equipment, net 21,688 20,456
Federal Reserve and Federal Home Loan Bank Stock, at cost 5,610 5,223
Foreclosed assets and other assets held for sale, net 104 -
Interest receivable 5,490 4,908
Goodwill 27,158 23,239
Cash value of life insurance 32,208 30,685
Mortgage servicing rights 15,254 14,868
Other assets 10,308 12,649
Total assets $ 1,545,367 $ 1,379,517
Liabilities and shareholders' equity
Liabilities
Deposits
Non interest bearing demand $ 254,063 $ 232,155
Interest bearing demand 202,501 201,085
Savings 296,484 237,987
Money market 280,896 222,161
Time deposits 273,300 259,217
Total deposits 1,307,244 1,152,605
Repurchase agreements 9,230 10,585
Federal Home Loan Bank advances 35,000 35,000
Trust preferred securities 10,310 10,310
Subordinated debt net of issuance costs 19,739 19,690
Interest payable 2,460 2,351
Other liabilities 20,148 21,468
Total liabilities 1,404,131 1,252,009
Commitments & Contingent Liabilities
Shareholders' Equity
Preferred stock, nopar value; authorized 200,000 shares; 2025 - 0 shares outstanding, 2024 - 0 shares outstanding - -
Common stock, nopar value; 2025 - 10,500,000 shares authorized, 8,525,375 shares issued; 2024 - 10,500,000 shares authorized, 8,525,375 shares issued 61,319 61,319
Additional paid-in capital 15,160 15,194
Retained earnings 126,311 116,186
Accumulated other comprehensive loss (21,481 ) (30,234 )
Treasury stock, at cost; ( 2025 - 2,249,417 common shares; 2024 - 1,977,538 common shares) (40,073 ) (34,957 )
Total shareholders' equity 141,236 127,508
Total liabilities and shareholders' equity $ 1,545,367 $ 1,379,517

See Notes to Consolidated Financial Statements

F-2

SB Financial Group, Inc.

Consolidated Statements of Income

Years Ended December 31,

($ in thousands, except per share data) 2025 2024
Interest Income
Loans
Taxable $ 64,986 $ 56,863
Tax exempt 455 496
Securities
Taxable 4,495 4,870
Tax exempt 144 146
Other interest income 3,840 1,974
Total interest income 73,920 64,349
Interest Expense
Deposits 22,490 21,035
Repurchase agreements & other 95 154
Federal Home Loan Bank advance expense 1,467 1,721
Trust preferred securities expense 637 739
Subordinated debt expense 778 778
Total interest expense 25,467 24,427
Net Interest Income 48,453 39,922
Provision (benefit) for credit losses - loans 1,274 (440 )
Provision for unfunded commitments 32 564
Total provision for credit losses 1,306 124
Net interest income after provision for credit losses 47,147 39,798
Noninterest Income
Wealth management fees 3,535 3,511
Customer service fees 3,544 3,467
Gain on sale of mortgage loans & OMSR 5,015 4,565
Mortgage loan servicing fees, net 1,562 2,183
Gain on sale of non-mortgage loans 143 145
Title insurance income 2,048 1,635
Other income 1,260 1,511
Total noninterest income 17,107 17,017
Noninterest Expense
Salaries and employee benefits 25,077 23,603
Net occupancy expense 3,309 2,884
Equipment expense 4,535 4,333
Data processing fees 3,840 3,075
Professional fees 3,594 2,927
Marketing expense 651 821
Telephone and communications 511 525
Postage and delivery expense 541 447
State, local and other taxes 1,091 907
Employee expense 763 733
Other expense 3,087 2,704
Total noninterest expense 46,999 42,959
Income before income tax 17,255 13,856
Provision for income taxes 3,281 2,386
Net Income $ 13,974 $ 11,470
Basic earnings per common share $ 2.19 $ 1.72
Diluted earnings per common share $ 2.19 $ 1.72

See Notes to Consolidated Financial Statements

F-3

SB Financial Group, Inc.

Consolidated Statements of Comprehensive Income

Years Ended December 31,

($ in thousands) 2025 2024
Net income $ 13,974 $ 11,470
Other comprehensive income (loss)
Available-for-sale investment securities:
Gross unrealized holding gain (loss) arising in the period 11,081 (510 )
Related tax benefit (expense) (2,328 ) 107
Net effect on other comprehensive income (loss) 8,753 (403 )
Total comprehensive income $ 22,727 $ 11,067

See Notes to Consolidated Financial Statements

F-4

SB Financial Group, Inc.

Consolidated Statements of Shareholders' Equity

Years Ended December 31,

($ in thousands, except per share data) Common
Stock 		Additional
Paid-in
Capital 		Retained
Earnings 		Accumulated Other Comprehensive
Loss 		Treasury
Stock 		Total
January 1, 2025 $ 61,319 $ 15,194 $ 116,186 $ (30,234 ) $ (34,957 ) $ 127,508
Net income 13,974 13,974
Other comprehensive income 8,753 8,753
Dividends on common, $0.60 per share (3,849 ) (3,849 )
Restricted stock vesting (570 ) 570
-
Repurchased stock (283,490 shares) (5,686 ) (5,686 )
Stock based compensation expense 536 536
December 31, 2025 $ 61,319 $ 15,160 $ 126,311 $ (21,481 ) $ (40,073 ) $ 141,236
($ in thousands, except per share data) Common
Stock 		Additional
Paid-in
Capital 		Retained
Earnings 		Accumulated Other Comprehensive
Loss 		Treasury
Stock 		Total
January 1, 2024 $ 61,319 $ 15,124 $ 108,486 $ (29,831 ) $ (30,756 ) $ 124,342
Net income 11,470 11,470
Other comprehensive loss (403 ) (403 )
Dividends on common, $0.56 per share (3,770 ) (3,770 )
Restricted stock vesting (567 ) 567
-
Repurchased stock (253,817 shares) (4,768 ) (4,768 )
Stock based compensation expense 637 637
December 31, 2024 $ 61,319 $ 15,194 $ 116,186 $ (30,234 ) $ (34,957 ) $ 127,508

See Notes to Consolidated Financial Statements

F-5

SB Financial Group, Inc.

Consolidated Statements of Cash Flows

Years Ended December 31,

($ in thousands)
2025 2024
Operating Activities
Net Income $ 13,974 $ 11,470
Items not requiring (providing) cash
Depreciation and amortization 2,198 2,151
Provision for credit losses 1,306 124
Expense of share-based compensation plan 536 637
Amortization of premiums and discounts on securities 432 493
Amortization of intangible assets 237 66
Amortization of originated mortgage servicing rights 1,789 1,335
Impairment (recovery) of mortgage servicing rights 289 (41 )
Deferred income taxes (111 ) 2,017
Proceeds from sale of loans held for sale 251,665 216,031
Originations of loans held for sale (243,962 ) (217,822 )
Gain from sale of loans (5,158 ) (4,710 )
Changes in
Interest receivable (582 ) (251 )
Other assets 5,023 (2,656 )
Interest payable & other liabilities (3,597 ) 607
Net cash provided by operating activities 24,039 9,451
Investing Activities
Purchases of available-for-sale securities (100 ) (1,677 )
Proceeds from maturities of interest bearing time deposits 1,375 1,184
Purchase of interest bearing time deposits (950 ) (1,214 )
Proceeds from maturities of available-for-sale securities 23,709 18,794
Proceeds from sales of available-for-sale securities 30,122
-
Net change in loans (115,646 ) (46,773 )
Purchase of premises, equipment (2,602 ) (1,229 )
Purchase of bank owned life insurance (800 ) (800 )
Purchase of Federal Reserve and Federal Home Loan Bank Stock (560 )
-
Proceeds from sale of Federal Reserve and Federal Home Loan Bank Stock 290 2,056
Proceeds from sale of foreclosed assets 91 711
Acquisition, net of cash acquired (paid) (3,014 )
-
Net cash used in investing activities (68,085 ) (28,948 )
Financing Activities
Net increase in demand deposits, money market, interest checking & savings accounts 87,468 86,108
Net increase (decrease) in time deposits 14,083 (3,708 )
Net decrease in securities sold under agreements to repurchase (1,355 ) (2,802 )
Proceeds from Federal Home Loan Bank advances
-
133,000
Repayment of Federal Home Loan Bank advances (1,000 ) (181,600 )
Stock repurchase plan (5,686 ) (4,768 )
Dividends on common shares (3,849 ) (3,770 )
Net cash provided by financing activities 89,661 22,460
Increase in cash and cash equivalents 45,615 2,963
Cash and cash equivalents, beginning of year 25,928 22,965
Cash and cash equivalents, end of year $ 71,543 $ 25,928
Supplemental cash flow information
Interest paid $ 25,576 $ 24,519
Income taxes paid $ 2,050 $ 417
Supplemental non-cash disclosure
Recognition of right-of-use lease assets $ 75 $
-
Transfer of loans to foreclosed assets $ 195 $
-

See Notes to Consolidated Financial Statements

F-6

SB Financial Group, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, 2025, and 2024

Note 1: Organization and Summary of Significant Accounting Policies

Organization and Nature of Operations

SB Financial Group, Inc. ("SB Financial") is a financial holding company whose principal activity is the ownership and management of its wholly-owned subsidiaries, The State Bank and Trust Company ("State Bank"), SBFG Title, LLC dba Peak Title Agency ("SBFG Title"), and SB Captive, Inc. ("SB Captive"). State Bank owns all the outstanding stock of SBT Insurance, LLC ("SBI"). In December 2024, the Company completed the dissolution of four of its inactive subsidiaries - RFCBC, Inc., Rurbanc Data Services Inc., Rurban Mortgage Company and SBFG Mortgage, LLC. The "Company" refers to SB Financial and its consolidated subsidiaries collectively, except where the context indicates the reference relates solely to the registrant, SB Financial.

The Company is primarily engaged in providing a full range of banking and wealth management services to individual and corporate customers primarily located in Ohio, Indiana, and Michigan. The Company is subject to competition from other financial institutions in its market areas. The Company is regulated by certain federal and state agencies and undergoes periodic examinations by those regulatory authorities.

Principles of Consolidation

The Consolidated Financial Statements include the accounts of the Company, State Bank, SBFG Title, SB Captive, and SBI. All significant intercompany accounts and transactions were eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change relate to the determination of the ACL, loan servicing rights, and fair value of financial instruments.

Significant Accounting Policies

Cash Equivalents

The Company considers all liquid investments with original maturities of three months or less to be cash equivalents. At December 31, 2025 and 2024, cash equivalents consisted primarily of interest-bearing and noninterest bearing demand deposit balances held by correspondent banks.

At December 31, 2025, the Company's correspondent cash accounts exceeded federally insured limits by $0.7 million. Additionally, the Company had approximately $60.5 million of cash held by the Federal Reserve Bank ("FRB") and the Federal Home Loan Bank ("FHLB"), which is not federally insured.

F-7

Securities

Available-for-sale securities, which include any debt security for which the Company has no immediate plan to sell but which may be sold in the future, are carried at fair value. Unrealized gains and losses are recorded, net of related income tax effects, in other comprehensive income.

Amortization of premiums and accretion of discounts are recorded as interest income from securities. Realized gains and losses are recorded as net security gains (losses). Gains and losses on sales of securities are determined on the specific-identification method.

The Company has made a policy election to exclude accrued interest from the amortized cost basis of securities and report accrued interest separately in other assets on the consolidated balance sheets. A security is placed on nonaccrual status at the time any principal or interest payments become more than 90 days delinquent or if full collection of interest or principal becomes uncertain. Accrued interest for a security placed on nonaccrual is reversed against interest income. There was no accrued interest related to securities reversed against interest income for the years ended December 31, 2025, or 2024.

Allowance for Credit Losses - Available-for-Sale Securities

For available-for-sale securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security's amortized cost basis is written down to fair value through income as a provision for credit losses. For available-for-sale securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an ACL is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis.

Changes in the ACL are recorded as provision for (or reversal of) credit losses. Available-for-sale securities are charged-off against the allowance or, in the absence of any allowance, written down through income when deemed uncollectible by management or when either of the aforementioned criteria regarding intent or requirement to sell is met. At December 31, 2025, no ACL on available-for-sale securities was recorded.

Management has made the accounting policy election to exclude accrued interest receivable on available-for-sale securities from the estimate of credit losses. Should a decline in fair value be the result of credit losses or other factors, the security would be moved into a nonaccrual status and all accrued interest be reversed. Accrued interest receivable on available-for-sale debt securities totaled $0.6 million at December 31, 2025.

Mortgage Loans Held for Sale

Mortgage loans originated and intended for sale in the secondary market are carried at the lower of cost or fair value in the aggregate. Net unrealized losses, if any, are recognized through a valuation allowance by charges to noninterest income. Gains and losses on loan sales are recorded in noninterest income. The Company utilizes third-party hedges to minimize the impact of interest rate risk fluctuations, and their impact is realized through noninterest income.

F-8

Loans

Loans that management has the intent and ability to hold for the foreseeable future, or until maturity or payoffs, are reported at their outstanding principal balances adjusted for any charge offs, the ACL, any deferred fees or costs on originated loans and unamortized premiums or discounts on purchased loans. Interest income is reported on the interest method and includes amortization of net deferred loan fees and costs over the loan term. Generally, loans are placed on nonaccrual status not later than 90 days past due. Past due status is based on the contractual terms of the loan. All interest accrued, but not collected for loans that are placed on nonaccrual or charged off, is reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Allowance for Credit Losses - Loans

The ACL is a valuation account that is deducted from the loans' amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the allowance when management believes that the uncollectability of a loan balance is confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.

Management estimates the ACL using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as changes in environmental conditions, such as changes in unemployment rates, property values, or other relevant factors.

The Company measures expected credit losses for loans on a pooled basis when similar risk characteristics exist. The Company has identified the following portfolio segments:

● Commercial & Industrial - Commercial & industrial loans consist of loans or lines of credit to finance accounts receivable, inventory or other general business needs, and lease financing agreements for equipment, vehicles, or other assets. The primary risk associated with commercial & industrial loans and lease financing agreements is the ability of borrowers to achieve business results consistent with those projected at origination. Failure to achieve these projections presents risk the borrower will be unable to service the debt consistent with the contractual terms of the loan or lease.
● Commercial Real Estate - Owner Occupied- Owner occupied commercial real estate loans consist of loans to purchase or re-finance owner occupied nonresidential properties. This includes office buildings and other commercial facilities. Commercial mortgages secured by owner occupied properties are primarily dependent on the ability of borrowers to achieve business results consistent with those projected at loan origination. While these loans are collateralized by real property in an effort to mitigate risk, it is possible the liquidation of collateral will not fully satisfy the obligation as the commercial real estate collateral may be more adversely affected by conditions in the real estate markets or in the general economy.
● Commercial Real Estate - Nonowner Occupied- Nonowner occupied commercial real estate loans consist of loans to purchase, construct, or refinance investment nonresidential properties. This includes office buildings and other facilities rented or leased to unrelated parties, as well as multifamily properties. The primary risk associated with nonowner occupied commercial real estate loans is the ability of the income-producing property that collateralizes the loan to produce adequate cash flow to service the debt. While these loans are collateralized by real property in an effort to mitigate risk, it is possible the liquidation of collateral will not fully satisfy the obligation as the commercial real estate collateral may be more adversely affected by conditions in the real estate markets or in the general economy.

F-9

● Agricultural- Agricultural loans consist of loans or lines of credit to finance farmland, equipment, and general business needs or other assets. The primary risk associated with agricultural loans is the ability of borrowers to achieve business results consistent with those projected at origination. Failure to achieve these projections presents risk the borrower will be unable to service the debt consistent with the contractual terms of the loan.
● Residential Real Estate- Residential real estate mortgage loans consist of loans to purchase or refinance the borrower's primary dwelling, second residence or vacation home and are often secured by 1-4 family residential property. Significant and rapid declines in real estate values can result in borrowers having debt levels in excess of the current market value of the collateral.
● Home Equity Line of Credit (HELOCs)- Home equity loans consist of HELOCs and other lines of credit secured by first or second liens on the borrower's primary residence. These loans are secured by both senior and junior liens on the residential real estate and are particularly susceptible to declining collateral values. This risk is elevated for loans secured by junior liens as a substantial decline in value could render the junior lien position effectively unsecured
● Consumer- Consumer loans consist of loans to finance unsecured home improvements, personal assets, such as automobiles or recreational vehicles, and revolving lines of credit that can be secured or unsecured. Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas. The value of the underlying collateral within this class is at risk of potential rapid depreciation which could result in unpaid balances in excess of the collateral.

The Company utilizes a Discounted Cash Flow ("DCF") method to estimate the quantitative portion of the ACL for all loan pools evaluated on a collective pooled basis, with the exception of the credit card portfolio, which is estimated using the Remaining Life Method. For each segment, a Loss Driver Analysis ("LDA") is performed in order to identify appropriate loss drivers and create a regression model for use in forecasting cash flows. The LDA utilizes the Company's own Federal Financial Institutions Examination Council's ("FFIEC") Call Report data, as well as peer institution data.

In creating the DCF model, the Company has established a one-year reasonable and supportable forecast period with a one-year straight line reversion to the long-term historical average. The Company's own loan-level loss data contained within the model is being supplemented with peer data in most loan pools as there was not sufficient loan-level detail from prior cycles reflecting similar economic conditions as the forecasted loss drivers to result in a sound calculation.

Key inputs into the DCF model include loan-level detail, including the amortized cost basis of individual loans, payment structure, loss history, and forecasted loss drivers. The Company utilizes data from Federal Reserve Economic Data ("FRED") to provide economic forecasts under various scenarios, which are applied to loan pools to reflect credit risk in the current economic environment.

Additional key assumptions in the DCF model include the probability of default ("PD"), loss given default ("LGD"), and prepayment/curtailment rates. When possible, the Company utilizes its own PDs for the reasonable and supportable forecast period. When it is not possible to use the Company's own PDs, the LDA is utilized to determine PDs based on the forecasted economic factors. When possible, the Company utilizes its own LGDs for the reasonable and supportable forecast period. When it is not possible to use the Company's own LGDs, the LGD is derived using a method referred to as Frye Jacobs. The Frye Jacobs method is a mathematical formula that traces the relationship between LGD and PD over time and projects the LGD based on the level of PD forecasted. In all cases, the Frye Jacobs method is utilized to calculate LGDs during the reversion period and long-term historical average. The Company's own prepayment and curtailment rates were used in the ACL estimate.

Management also considers further adjustments to historical loss information for current conditions and reasonable and supportable forecasts that differ from the conditions that exist for the period over which historical information is evaluated as well as other changes in qualitative factors not inherently considered in the quantitative analyses. A number of factors are considered including economic forecast uncertainty, credit quality trends, valuation trends, concentration risk, quality of loan review, changes in personnel, impact of rising interest rates, external factors and other considerations. The resulting qualitative adjustments are applied to the relevant collectively evaluated loan pools. The qualitative analysis increases or decreases the allowance allocation for each loan pool based on the assessment of factors described above. During each reporting period, management also considers the need to adjust the baseline lifetime loss rates for factors that may cause expected losses to differ from those experienced in the historical loss periods.

F-10

Loans that do not share risk characteristics are evaluated on an individual basis. When management determines that foreclosure is probable and the borrower is experiencing financial difficulty, the expected credit losses are based on the fair value of collateral at the reporting dated adjusted for selling costs as appropriate.

The Company is also required to consider expected credit losses associated with loan commitments over the contractual period in which it is exposed to credit risk on the underlying commitments. Any allowance for off-balance sheet credit exposures is reported in Other liabilities on the Company's consolidated balance sheet and is increased or decreased through a provision for credit loss expense on the Company's consolidated statement of income. The calculation includes consideration of the likelihood that funding will occur and forecasted credit losses on commitments expected to be funded over their estimated lives. The allowance is calculated using the same methodology, inputs and assumptions as the funded portion of loans at the segment level applied to the amount of commitments expected to be funded.

While the Company's policies and procedures used to estimate the ACL, as well as the resultant provision for credit losses charged to income, are considered adequate by management and are reviewed periodically by regulators, model validators and internal audit, they are necessarily approximate and imprecise. There are factors beyond the Company's control, such as changes in projected economic conditions, real estate markets or particular industry conditions, which may materially impact asset quality and the adequacy of the ACL and thus the resulting provision for credit losses.

Premises and Equipment

Depreciable assets are stated at cost less accumulated depreciation. Depreciation is charged to expense using the straight-line method for buildings and equipment over the estimated useful lives of the assets. Leasehold improvements are capitalized and depreciated using the straight-line method over the terms of the respective leases.

Long-lived Asset Impairment

The Company evaluates the recoverability of the carrying value of long-lived assets whenever events or circumstances indicate the carrying amount may not be recoverable. If a long-lived asset is tested for recoverability and the undiscounted estimated future cash flows expected to result from the use and eventual disposition of the asset is less than the carrying amount of the asset, the asset's cost is adjusted to fair value and an impairment loss is recognized as the amount by which the carrying amount of a long-lived asset exceeds its fair value.

Federal Reserve Bank (FRB) and Federal Home Loan Bank (FHLB) Stock

FRB and FHLB stock are required investments for institutions that are members of the FRB and FHLB systems. The required investment in the common stock is based on a predetermined formula, carried at cost and evaluated for impairment.

Foreclosed Assets and Other Assets Held for Sale

Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value less costs to sell at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of the carrying amount or the fair value less cost to sell. Revenue and expenses from operations related to foreclosed assets and changes in the valuation allowance are included in net income or expense from foreclosed assets.

F-11

Goodwill

Goodwill is tested for impairment annually or upon a triggering event. If the implied fair value of goodwill is lower than its carrying amount, goodwill impairment is indicated and goodwill is written down to its implied fair value.

Core Deposits and Other Intangibles

Intangible assets are being amortized on a straight-line basis over weighted-average periods ranging from one to ten years. Such assets are periodically evaluated as to the recoverability of their carrying value. Purchased software is being amortized using the straight-line method over periods ranging from one to three years.

Derivatives

The Company enters into forward contracts for the future delivery of mortgage loans to third-party investors and enters into interest rate lock commitments ("IRLCs") with potential borrowers to fund specific mortgage loans that will be sold into the secondary market. The forward contracts are entered into in order to economically hedge the effect of changes in interest rates resulting from the Company's commitment to fund the loans.

The IRLCs and forward contracts are not designated as accounting hedges and are recorded at fair value with the changes in fair value reflected in noninterest income on the consolidated statements of income. The fair value of derivative instruments with a positive fair value are reported in accrued income and other assets on the consolidated balance sheets, while the derivative instruments with a negative fair value are reported in accrued expenses and other liabilities on the consolidated balance sheets.

For exchange-traded contracts, fair value is based on quoted market prices. For non-exchange traded contracts, fair value is based on dealer quotes, pricing models, discounted cash flow methodologies or similar techniques for which the determination of fair value may require significant management judgment or estimation.

Mortgage Servicing Rights

Mortgage servicing assets are recognized separately when rights are acquired through purchase or through sale of financial assets. Under the servicing assets and liabilities accounting guidance (Accounting Standards Codification "ASC" 860-50), servicing rights from the sale or securitization of loans originated by the Company are initially measured at fair value at the date of transfer. The Company subsequently measures each class of servicing asset using the amortization method. Under the amortization method, servicing rights are amortized in proportion to and over the period of estimated net servicing income. The amortized assets are assessed for impairment based on fair value at each reporting date.

Fair value is based on market prices for comparable mortgage servicing contracts, when available, or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as the cost of service, the discount rate, the custodial earning rate, an inflation rate, ancillary income, prepayment speeds and default rates and losses. These variables change from quarter to quarter as market conditions and projected interest rates change, and may have an adverse impact on the value of the mortgage servicing right and may result in a reduction to noninterest income.

Each class of separately recognized servicing assets subsequently measured using the amortization method is evaluated and measured for impairment. Impairment is determined by stratifying rights into tranches based on predominant characteristics, such as interest rate, loan type and investor type. Impairment is recognized through a valuation allowance for an individual tranche, to the extent that fair value is less than the carrying amount of the servicing assets for that tranche. The valuation allowance is adjusted to reflect changes in the measurement of impairment after the initial measurement of impairment. Changes in valuation allowances are reported with "Mortgage loan servicing fees, net" in the income statement. Fair value in excess of the carrying amount of servicing assets for that stratum is not recognized.

F-12

Servicing fee income is recorded for fees earned for servicing loans. The fees are based on a contractual percentage of the outstanding principal or a fixed amount per loan and are recorded as income when earned. The amortization of mortgage servicing rights is netted against loan servicing fee income.

Share-Based Employee Compensation Plan

At December 31, 2025 and 2024, the Company had a share-based employee compensation plan that permits the grant of stock options, restricted stock and other share-based awards to employees, directors and advisory board members of the Company and its subsidiaries (see Note 18 to the Consolidated Financial Statements).

Transfers of Financial Assets

Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company - put presumptively beyond the reach of the transferor and its creditors, even in bankruptcy or other receivership, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before the maturity or the ability to unilaterally cause the holder to return specific assets.

Income Taxes

The Company accounts for income taxes in accordance with income tax accounting guidance (ASC 740). The income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Company determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur. Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.

Uncertain tax positions are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the term "upon examination" also includes resolution of the related appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances and information available at the reporting date and is subject to management's judgment.

The Company recognizes interest and penalties on income taxes as a component of income tax expense.

The Company files consolidated income tax returns with its subsidiaries. With a few exceptions, the Company is no longer subject to U.S. Federal, State and Local examinations by tax authorities for the years before 2021. As of December 31, 2025, the Company had nouncertain income tax positions.

Treasury Shares

Treasury stock is stated at cost. Cost is determined by the weighted-average cost method.

F-13

Earnings Per Share

Earnings per share ("EPS") is computed using the two-class method. Basic EPS represent income available to common shareholders divided by the weighted-average number of common shares outstanding during each period. Diluted EPS reflect additional potential common shares that may be issued by the Company related solely to outstanding stock options or awards which are determined using the treasury stock method. Treasury stock shares are not deemed outstanding for EPS calculations.

Comprehensive Income

Comprehensive income consists of net income and other comprehensive income (loss), net of applicable income taxes. Other comprehensive income (loss) includes unrealized appreciation (depreciation) on available-for-sale securities. AOCI consists solely of the cumulative unrealized gains and losses on available-for-sale securities net of income tax.

Subordinated Debt

At December 31, 2025, the Company had subordinated debt obligations of $20.0 million related to its 3.65% Fixed to Floating Rate Subordinated Notes due 2031, which were issued and sold by the Company on May 27, 2021. The Subordinated Notes were issued in order to provide additional funds for various corporate obligations of the Company, including share buybacks, acquisition costs and organic asset growth (see Note 13 to the Consolidated Financial Statements).

Revenue Recognition

The Company recognizes revenues as they are earned based on contractual terms, as transactions occur, or services are provided and collectability is reasonably assured. The Company's principal source of revenue is interest income from loans and leases and investment securities. The Company also earns noninterest income from various banking and financial services offered through State Bank, and title insurance provided by SBFG Title.

Interest income is the largest source of revenue for the Company and is primarily recognized on an accrual basis.

Noninterest income is earned through a variety of financial and transaction services provided to corporate and consumer clients such as trust and wealth advisory, deposit account, debit card, mortgage banking and title insurance.

Adoption of New Accounting Standards:

ASU No. 2020-04: Reference Rate Reform - Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848)

This guidance provides temporary options to ease the potential burden in accounting for reference rate reform. It is intended to help stakeholders during the global market-wide reference rate transition period. The guidance is effective as of March 12, 2020 through December 31, 2022. However, a deferral of the implementation of the Reference Rate Reform was issued in December of 2022, which extended the implementation to December 31, 2025. The Company has implemented a replacement for the reference rate and has determined that the changes did not have a material impact on the Company's consolidated financial statements.

ASU No. 2023-02: Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (ASU 2023-02)

This ASU permits reporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization if certain conditions are met. A reporting entity makes an accounting policy election to apply theproportional amortization method on a tax-credit-by-tax-credit-program basis rather than electing to apply the proportional amortization method at the reporting entity level or to individual investments. The Company adopted the standard using a modified retrospective transition approach to the amendments related to our low income housing tax credit ("LIHTC") investments that are eligible to apply proportional amortization. The adoption of this standard did not have a material effect on the Company's operating results or financial condition.

F-14

ASU No. 2023-07: Segment Reporting (Topic 280) Improvements to Reportable Segment Disclosures

This ASU expands operating segment disclosures and requires all segment disclosures to be reported in both annual and interim periods. The new standard requires disclosure of the following: significant segment expenses that are regularly provided to the chief operating decision maker ("CODM") for reportable segments; the title and position of the CODM as well as how the CODM uses the reported measure(s) of profit and loss to assess segment performance; and "other segment items" by reportable segment and a description of its composition. The Company adopted the standard on January 1, 2024, and its adoption did not have a material effect on our financial statements.

ASU No. 2023-09: Income Taxes (Topic 740): Improvements to Income Tax Disclosures

In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" and became effective on January 1, 2025. The amendments require that public business entities on an annual basis (1) disclose specific categories in the rate reconciliation, and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income (or loss) by the applicable statutory income tax rate). The amendments require that all entities disclose on an annual basis the following information about income taxes paid: (1) the amount of income taxes paid (net of refunds received) disaggregated by federal (national), state, and foreign taxes; and (2) the amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than 5 percent of total income taxes paid (net of refunds received). The amendments also require that all entities disclose the following information: (1) income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign; and (2) income tax expense (or benefit) from continuing operations disaggregated by federal (national), state, and foreign. The Company adopted ASU No. 2023-09 on a retrospective basis and its adoption did not have a material impact to the financial statements of the Company.

Note 2: Earnings Per Share

Earnings Per Share ("EPS") is computed using the two-class method. Basic EPS is computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding during the applicable period, excluding participating securities. Participating securities include non-vested restricted stock awards. Non-vested restricted stock awards are considered participating securities to the extent the holders of these securities receive non-forfeitable dividends at the same rate as holders of common shares. Diluted EPS is computed using the weighted-average number of shares determined for the basic EPS plus the dilutive effect of stock compensation using the treasury stock method. EPS for the years ended December 31, 2025, and 2024 is computed as follows:

Twelve Months Ended Dec. 31,
($ and outstanding shares in thousands - except per share data) 2025 2024
Distributed earnings allocated to common shares $ 3,848 $ 3,770
Undistributed earnings allocated to common shares 10,100 7,666
Net earnings allocated to common shares 13,948 11,436
Net earnings allocated to participating securities 26 34
Net Income allocated to common shares and participating securities $ 13,974 $ 11,470
Weighted average shares outstanding for basic earnings per share 6,369 6,660
Dilutive effect of stock compensation 19 20
Weighted average shares outstanding for diluted earnings per share 6,388 6,680
Basic earnings per common share $ 2.19 $ 1.72
Diluted earnings per common share $ 2.19 $ 1.72

There were no anti-dilutive shares in 2025 or 2024.

F-15

Note 3: Available-for-Sale Securities

The amortized cost and appropriate fair values, together with gross unrealized gains and losses, of available-for-sale securities at December 31, 2025 and December 31, 2024 were as follows:

Gross Gross
($ in thousands) Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
December 31, 2025
U.S. Treasury and Government agencies $ 5,687 $ 3 $ (487 ) $ 5,203
Mortgage-backed securities 184,588 5 (24,641 ) 159,952
State and political subdivisions 10,842 8 (1,001 ) 9,849
Other corporate securities 14,700
-
(1,078 ) 13,622
Totals $ 215,817 $ 16 $ (27,207 ) $ 188,626
Gross Gross
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
December 31, 2024
U.S. Treasury and Government agencies $ 8,120 $
-
$ (731 ) $ 7,389
Mortgage-backed securities 203,646 4 (34,030 ) 169,620
State and political subdivisions 10,893
-
(1,486 ) 9,407
Other corporate securities 17,200
-
(2,029 ) 15,171
Totals $ 239,859 $ 4 $ (38,276 ) $ 201,587

The amortized cost and fair value of securities available-for-sale at December 31, 2025, by contractual maturity, are shown below. Expected maturities differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

Amortized Fair
($ in thousands) Cost Value
Within one year $ 275 $ 275
Due after one year through five years 1,281 1,272
Due after five years through ten years 22,794 21,133
Due after ten years 6,879 5,994
31,229 28,674
Mortgage-backed securities 184,588 159,952
Totals $ 215,817 $ 188,626

F-16

The fair value of securities pledged as collateral, to secure public deposits and for other purposes, was $115.1 million at December 31, 2025, and $115.5 million at December 31, 2024. Securities delivered for repurchase agreements (not included above) were $26.0 million at December 31, 2025, and $17.3 million at December 31, 2024.

Certain investments in debt securities are reported in the financial statements at an amount less than their historical cost. There were 125 securities and 138 securities reported with amounts less than their historical value at December 31, 2025, and 2024, respectively. Total fair value of these investments was $187.0 million and $201.3 million at December 31, 2025 and 2024, respectively, which was approximately 99 percent and 99 percent, respectively, of the Company's available-for-sale investment portfolio.

The following tables present securities with unrealized losses at December 31, 2025 and 2024 aggregated by major security type and length of time in a continuous unrealized loss position:

($ in thousands) Less than 12 Months 12 Months or Longer Total
December 31, 2025 Number of Securities Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses
U.S. Treasury and Government agencies 5 $
-
$
-
$ 5,100 $ (487 ) $ 5,100 $ (487 )
Mortgage-backed securities 89
-
-
159,690 (24,641 ) 159,690 (24,641 )
State and political subdivisions 18
-
-
8,634 (1,001 ) 8,634 (1,001 )
Other corporate securities 13
-
-
13,622 (1,078 ) 13,622 (1,078 )
Totals 125 $
-
$
-
$ 187,046 $ (27,207 ) $ 187,046 $ (27,207 )
Less than 12 Months 12 Months or Longer Total
December 31, 2024 Number of Securities Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses
U.S. Treasury and Government agencies 11 $ 1,929 $
-
$ 5,460 $ (731 ) $ 7,389 $ (731 )
Mortgage-backed securities 92
-
-
169,286 (34,030 ) 169,286 (34,030 )
State and political subdivisions 21 1,319 (21 ) 8,088 (1,465 ) 9,407 (1,486 )
Other corporate securities 14 385 (115 ) 14,786 (1,914 ) 15,171 (2,029 )
Totals 138 $ 3,633 $ (136 ) $ 197,620 $ (38,140 ) $ 201,253 $ (38,276 )

Based on evaluation of available evidence, including recent changes in market interest rates, credit rating information and information obtained from regulatory filings, management believes the declines in fair value for these securities are temporary. Management reviews these securities on a quarterly basis and evaluates if any security has a fair value less than its amortized cost. Once these securities are identified, management determines whether a decline in fair value resulted from a credit loss or other factors. In making the assessment, the Company may consider various factors including the extent to which fair value is less than amortized cost, performance on any underlying collateral, downgrades in the ratings of the security by a rating agency, the failure of the issuer to make scheduled interest or principal payments and adverse conditions specifically related to the security. If the assessment indicates that a credit loss exists, a provision is recorded to the ACL.

F-17

Note 4: Loans and Allowance for Credit Losses

The following table presents the categories of loans at December 31, 2025, and 2024:

Total Loans
($ in thousands) 2025 2024
Commercial & industrial $ 113,878 $ 124,764
Commercial real estate - owner occupied 161,086 134,431
Commercial real estate - nonowner occupied 435,897 345,142
Agricultural 76,514 64,680
Residential real estate 304,741 308,378
Home equity line of credit (HELOC) 69,173 53,811
Consumer 19,302 15,529
Total loans 1,180,591 1,046,735
Allowance for credit losses (16,114 ) (15,096 )
Loans, net $ 1,164,477 $ 1,031,639

The Company makes commercial, agri-business, consumer and residential loans to customers throughout its defined market area. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since a portion of the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Each customer's creditworthiness is evaluated on a case-by-case basis. The amount of collateral obtained, if deemed necessary, is based on management's credit evaluation of the customer. Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, commercial real estate and residential real estate.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing and similar transactions. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers.

Listed below is a summary of loan commitments, unused lines of credit, and standby letters of credit as of December 31, 2025, and 2024.

($ in thousands) 2025 2024
Loan commitments and unused lines of credit $ 232,870 $ 224,895
Standby letters of credit 1,223 915
Totals $ 234,093 $ 225,810

F-18

The risk characteristics of each loan portfolio segment are as follows:

Commercial & Industrial and Agricultural

Commercial & industrial and agricultural loans are primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets, such as accounts receivable or inventory, and may include a personal guarantee. Short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.

Commercial Real Estate (Owner and Nonowner Occupied)

Commercial real estate loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. The characteristics of properties securing the Company's commercial real estate portfolio are diverse, but with geographic location almost entirely in the Company's market area. Management monitors and evaluates commercial real estate loans based on collateral, geography and risk grade criteria. In general, the Company avoids financing single purpose projects unless other underwriting factors are present to help mitigate risk. In addition, management tracks the level of owner-occupied commercial real estate versus non-owner-occupied loans.

Construction loans are underwritten utilizing feasibility studies, independent appraisal reviews and financial analysis of the developers and property owners. Construction loans are generally based on estimates of costs and value associated with the completed project. These estimates may be inaccurate. Construction loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project. Sources of repayment for these types of loans may be pre-committed permanent loans from approved long-term lenders, sales of developed property or an interim loan commitment from the Company until permanent financing is obtained. These loans are closely monitored by on-site inspections and are considered to have higher risks than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, governmental regulation of real property, general economic conditions and the availability of long-term financing.

Residential Real Estate, Home Equity Line of Credit ("HELOC") and Consumer

Residential and consumer loans consist of two segments - residential mortgage loans and personal loans. Residential mortgage loans are secured by 1-4 family residences and are generally owner-occupied, and the Company generally establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded. HELOCs are typically secured by a subordinate interest in 1-4 family residences, and consumer personal loans are secured by consumer personal assets, such as automobiles or recreational vehicles. Some consumer personal loans are unsecured, such as small installment loans and certain lines of credit. Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas, such as unemployment levels. Repayment can also be impacted by changes in property values on residential properties. Risk is mitigated by the fact that these loans are of smaller individual amounts and spread over a large number of borrowers.

Allowance for Credit Losses (ACL)

The ACL is an estimate of the expected credit losses on financial assets measured at amortized cost, which is measured using relevant information about past events, including historical credit loss experience on financial assets with similar risk characteristics, current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the financial assets. A provision for credit losses is charged to operations based on management's periodic evaluation of these and other pertinent factors.

F-19

The following tables summarize the activity related to the ACL for the twelve months ended December 31, 2025, and 2024.

($ in thousands)
For the twelve months ended
December 31, 2025 		Balance, beginning of period Initial allowance for credit losses on acquired PCD loans Chargeoffs Recoveries Provision for Credit Losses Balance, end of period
Commercial & industrial $ 2,666 $ 5 $ (177 ) $
-
$ (673 ) $ 1,821
Commercial real estate - owner occupied 1,806
-
-
-
427 2,233
Commercial real estate - nonowner occupied 5,721
-
-
2 1,123 6,846
Agricultural 884
-
-
-
(576 ) 308
Residential real estate 3,330
-
(17 ) 1 617 3,931
HELOC 520
-
(4 ) 3 154 673
Consumer 169
-
(81 ) 12 202 302
Total $ 15,096 $ 5 $ (279 ) $ 18 $ 1,274 $ 16,114

($ in thousands)
For the twelve months ended
December 31, 2024 		Balance, beginning of period Initial allowance for credit losses on acquired PCD loans Chargeoffs Recoveries Provision for Credit Losses Balance, end of period
Commercial & industrial $ 2,003 $
-
$ (233 ) $ 5 $ 891 $ 2,666
Commercial real estate - owner occupied 1,952
-
-
-
(146 ) 1,806
Commercial real estate - nonowner occupied 5,718
-
-
-
3 5,721
Agricultural 440
-
-
-
444 884
Residential real estate 4,936
-
(3 )
-
(1,603 ) 3,330
HELOC 510
-
-
-
10 520
Consumer 227
-
(53 ) 34 (39 ) 169
Total $ 15,786 $
-
$ (289 ) $ 39 $ (440 ) $ 15,096

Collateral dependent loans are loans for which the repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. The Company reviews individually evaluated loans for designation as collateral dependent loans, as well as other loans that management of the Company designates as having higher risk. These loans do not share common risk characteristics and are not included within the collectively evaluated loans for determining the ACL.

The following tables present an analysis of collateral-dependent loans of the Company as of December 31, 2025, and 2024.

($ in thousands) Collateral Type Allocated
December 31, 2025 Real Estate Other Total Allowance
Commercial & industrial $ 1,367 $ 673 $ 2,040 $ 67
Commercial real estate - owner occupied 429
-
429 13
Commercial real estate - nonowner occupied 342
-
342
-
Residential real estate 561
-
561 17
Total $ 2,699 $ 673 $ 3,372 $ 97

F-20

($ in thousands) Collateral Type Allocated
December 31, 2024 Real Estate Other Total Allowance
Commercial & industrial $ 2,252 $ 625 $ 2,877 $ 380
Commercial real estate - owner occupied 429
-
429 13
Commercial real estate - nonowner occupied 370
-
370
-
Residential real estate 801
-
801 26
Total $ 3,852 $ 625 $ 4,477 $ 419

Credit Risk Profile

The Company categorizes loans into risk categories (loan grades) based on relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis includes loans with an outstanding balance greater than $100,000 and non-homogeneous loans, such as commercial and commercial real estate loans. This analysis is performed on a quarterly basis. The Company uses the following definitions for risk ratings:

Pass (grades 1 - 4): Loans which management has determined to be performing as expected and in agreement with the terms established at the time of loan origination.

Special Mention (grade 5): Loans have potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the Company's credit position at some future date. Special mention loans are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification. Ordinarily, special mention credits have characteristics which corrective management action would remedy.

Substandard (grade 6): Loans are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified must have a well-defined weakness or weaknesses that jeopardized the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful (grade 7): Loans classified as doubtful have all the weaknesses inherent in those classified Substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of current known facts, conditions and values, highly questionable and improbable.

Loss (grade 8): Loans are considered uncollectable and of such little value that continuing to carry them as assets on the Company's financial statement is not feasible. Loans will be classified as loss when it is neither practical nor desirable to defer writing off or reserving all or a portion of a basically worthless asset, even though partial recovery may be possible at some time in the future.

The Company evaluates the loan risk grading system definitions and allowance for credit loss methodology on an ongoing basis. The following table presents loan balances by credit quality indicators and gross chargeoffs by year of origination as of December 31, 2025.

F-21

($ in thousands) Term Loans by Year of Origination Revolving

Revolving Loans

Converted

December 31, 2025 2025 2024 2023 2022 2021 Prior Loans to Term Total
Commercial & industrial
Pass (1 - 4) $ 17,280 $ 18,882 $ 7,189 $ 9,298 $ 8,971 $ 14,998 $ 33,505 $ 561 $ 110,684
Special Mention (5)
-
30
-
-
231 116 25 517 919
Substandard (6)
-
-
310 153
-
155 99 62 779
Doubtful (7)
-
121 153 433 204 481
-
104 1,496
Loss (8)
-
-
-
-
-
-
-
-
-
Total $ 17,280 $ 19,033 $ 7,652 $ 9,884 $ 9,406 $ 15,750 $ 33,629 $ 1,244 $ 113,878
Current period gross chargeoffs $
-
$ 116 $
-
$
-
$
-
$ 33 $ 28 $
-
$ 177
Commercial real estate - owner occupied
Pass (1 - 4) $ 50,318 $ 21,967 $ 21,273 $ 14,931 $ 19,387 $ 31,347 $ 1,204 $ 228 $ 160,655
Special Mention (5)
-
-
-
-
-
-
-
-
-
Substandard (6)
-
-
-
-
-
431
-
-
431
Doubtful (7)
-
-
-
-
-
-
-
-
-
Loss (8)
-
-
-
-
-
-
-
-
-
Total $ 50,318 $ 21,967 $ 21,273 $ 14,931 $ 19,387 $ 31,778 $ 1,204 $ 228 $ 161,086
Current period gross chargeoffs $
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
Commercial real estate - nonowner occupied
Pass (1 - 4) $ 107,361 $ 96,667 $ 39,358 $ 48,962 $ 35,737 $ 98,539 $ 8,058 $ 969 $ 435,651
Special Mention (5)
-
-
-
-
-
-
-
-
-
Substandard (6)
-
-
-
141
-
105
-
-
246
Doubtful (7)
-
-
-
-
-
-
-
-
-
Loss (8)
-
-
-
-
-
-
-
-
-
Total $ 107,361 $ 96,667 $ 39,358 $ 49,103 $ 35,737 $ 98,644 $ 8,058 $ 969 $ 435,897
Current period gross chargeoffs $
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
Agricultural
Pass (1 - 4) $ 19,218 $ 4,810 $ 6,313 $ 12,609 $ 9,812 $ 7,772 $ 15,968 $ 12 $ 76,514
Special Mention (5)
-
-
-
-
-
-
-
-
-
Substandard (6)
-
-
-
-
-
-
-
-
-
Doubtful (7)
-
-
-
-
-
-
-
-
-
Loss (8)
-
-
-
-
-
-
-
-
-
Total $ 19,218 $ 4,810 $ 6,313 $ 12,609 $ 9,812 $ 7,772 $ 15,968 $ 12 $ 76,514
Current period gross chargeoffs $
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
Residential real estate
Pass (1 - 4) $ 28,287 $ 23,003 $ 36,413 $ 92,889 $ 68,439 $ 54,268 $ 1 $
-
$ 303,300
Special Mention (5)
-
-
-
-
-
-
-
-
-
Substandard (6)
-
-
257 96 236 852
-
-
1,441
Doubtful (7)
-
-
-
-
-
-
-
-
-
Loss (8)
-
-
-
-
-
-
-
-
-
Total $ 28,287 $ 23,003 $ 36,670 $ 92,985 $ 68,675 $ 55,120 $ 1 $
-
$ 304,741
Current period gross chargeoffs $
-
$
-
$
-
$
-
$
-
$ 17 $
-
$
-
$ 17
Home equity line of credit (HELOC)
Pass (1 - 4) $ 605 $ 62 $ 260 $ 391 $ 295 $ 497 $ 60,294 $ 6,560 $ 68,964
Special Mention (5)
-
-
-
-
-
-
-
-
-
Substandard (6)
-
-
-
-
-
35 81 93 209
Doubtful (7)
-
-
-
-
-
-
-
-
-
Loss (8)
-
-
-
-
-
-
-
-
-
Total $ 605 $ 62 $ 260 $ 391 $ 295 $ 532 $ 60,375 $ 6,653 $ 69,173
Current period gross chargeoffs $
-
$
-
$
-
$
-
$
-
$ 4 $
-
$
-
$ 4
Consumer
Pass (1 - 4) $ 6,935 $ 1,082 $ 1,249 $ 1,670 $ 645 $ 467 $ 7,239 $
-
$ 19,287
Special Mention (5)
-
-
-
-
-
-
-
-
-
Substandard (6)
-
6
-
9
-
-
-
-
15
Doubtful (7)
-
-
-
-
-
-
-
-
-
Loss (8)
-
-
-
-
-
-
-
-
-
Total $ 6,935 $ 1,088 $ 1,249 $ 1,679 $ 645 $ 467 $ 7,239 $
-
$ 19,302
Current period gross chargeoffs $
-
$ 2 $ 4 $
-
$
-
$
-
$ 75 $
-
$ 81
Total Loans
Pass (1 - 4) $ 230,004 $ 166,473 $ 112,055 $ 180,750 $ 143,286 $ 207,888 $ 126,269 $ 8,330 $ 1,175,055
Special Mention (5)
-
30
-
-
231 116 25 517 919
Substandard (6)
-
6 567 399 236 1,578 180 155 3,121
Doubtful (7)
-
121 153 433 204 481
-
104 1,496
Loss (8)
-
-
-
-
-
-
-
-
-
Total Loans $ 230,004 $ 166,630 $ 112,775 $ 181,582 $ 143,957 $ 210,063 $ 126,474 $ 9,106 $ 1,180,591
Current period gross chargeoffs $
-
$ 118 $ 4 $
-
$
-
$ 54 $ 103 $
-
$ 279

F-22

The following table presents loan balances by credit quality indicators and gross chargeoffs by year of origination as of December 31, 2024.

($ in thousands) Term Loans by Year of Origination Revolving

Revolving Loans

Converted

December 31, 2024 2024 2023 2022 2021 2020 Prior Loans to Term Total
Commercial & industrial
Pass (1 - 4) $ 22,688 $ 12,927 $ 12,813 $ 14,207 $ 9,101 $ 10,022 $ 36,363 $ 3,204 $ 121,325
Special Mention (5)
-
355
-
-
133
-
25
-
513
Substandard (6)
-
-
585
-
-
673 1,147 88 2,493
Doubtful (7)
-
153
-
204
-
48
-
28 433
Loss (8)
-
-
-
-
-
-
-
-
-
Total $ 22,688 $ 13,435 $ 13,398 $ 14,411 $ 9,234 $ 10,743 $ 37,535 $ 3,320 $ 124,764
Current period gross chargeoffs $
-
$ 42 $ 25 $ 23 $ 143 $
-
$
-
$
-
$ 233
Commercial real estate - owner occupied
Pass (1 - 4) $ 15,070 $ 30,372 $ 20,002 $ 24,406 $ 13,491 $ 30,140 $ 463 $ 49 $ 133,993
Special Mention (5)
-
-
-
-
-
-
-
-
-
Substandard (6)
-
-
-
-
430
-
-
-
430
Doubtful (7)
-
-
-
7
-
1
-
-
8
Loss (8)
-
-
-
-
-
-
-
-
-
Total $ 15,070 $ 30,372 $ 20,002 $ 24,413 $ 13,921 $ 30,141 $ 463 $ 49 $ 134,431
Current period gross chargeoffs $
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
Commercial real estate - nonowner occupied
Pass (1 - 4) $ 94,098 $ 47,026 $ 50,942 $ 40,584 $ 39,093 $ 72,609 $ 118 $
-
$ 344,470
Special Mention (5) 398
-
-
-
-
-
-
-
398
Substandard (6)
-
-
154
-
-
120
-
-
274
Doubtful (7)
-
-
-
-
-
-
-
-
-
Loss (8)
-
-
-
-
-
-
-
-
-
Total $ 94,496 $ 47,026 $ 51,096 $ 40,584 $ 39,093 $ 72,729 $ 118 $
-
$ 345,142
Current period gross chargeoffs $
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
Agricultural
Pass (1 - 4) $ 8,100 $ 8,295 $ 14,482 $ 10,748 $ 2,618 $ 8,967 $ 11,470 $
-
$ 64,680
Special Mention (5)
-
-
-
-
-
-
-
-
-
Substandard (6)
-
-
-
-
-
-
-
-
-
Doubtful (7)
-
-
-
-
-
-
-
-
-
Loss (8)
-
-
-
-
-
-
-
-
-
Total $ 8,100 $ 8,295 $ 14,482 $ 10,748 $ 2,618 $ 8,967 $ 11,470 $
-
$ 64,680
Current period gross chargeoffs $
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
Residential real estate
Pass (1 - 4) $ 31,291 $ 41,982 $ 100,375 $ 76,146 $ 28,237 $ 28,797 $
-
$
-
$ 306,828
Special Mention (5)
-
-
-
-
-
-
-
-
-
Substandard (6)
-
279
-
256 50 965
-
-
1,550
Doubtful (7)
-
-
-
-
-
-
-
-
-
Loss (8)
-
-
-
-
-
-
-
-
-
Total $ 31,291 $ 42,261 $ 100,375 $ 76,402 $ 28,287 $ 29,762 $
-
$
-
$ 308,378
Current period gross chargeoffs $
-
$
-
$
-
$ 3 $
-
$
-
$
-
$
-
$ 3
Home equity line of credit (HELOC)
Pass (1 - 4) $
-
$
-
$
-
$ 12 $ 18 $ 51 $ 46,908 $ 6,591 $ 53,580
Special Mention (5)
-
-
-
-
-
-
-
-
-
Substandard (6)
-
-
-
-
-
48 139 44 231
Doubtful (7)
-
-
-
-
-
-
-
-
-
Loss (8)
-
-
-
-
-
-
-
-
-
Total $
-
$
-
$
-
$ 12 $ 18 $ 99 $ 47,047 $ 6,635 $ 53,811
Current period gross chargeoffs $
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
Consumer
Pass (1 - 4) $ 1,909 $ 1,993 $ 3,247 $ 725 $ 319 $ 94 $ 7,229 $
-
$ 15,516
Special Mention (5)
-
-
-
-
-
-
-
-
-
Substandard (6)
-
-
13
-
-
-
-
-
13
Doubtful (7)
-
-
-
-
-
-
-
-
-
Loss (8)
-
-
-
-
-
-
-
-
-
Total $ 1,909 $ 1,993 $ 3,260 $ 725 $ 319 $ 94 $ 7,229 $
-
$ 15,529
Current period gross chargeoffs $
-
$
-
$
-
$ 5 $ 2 $
-
$ 46 $
-
$ 53
Total Loans
Pass (1 - 4) $ 173,156 $ 142,595 $ 201,861 $ 166,828 $ 92,877 $ 150,680 $ 102,551 $ 9,844 $ 1,040,392
Special Mention (5) 398 355
-
-
133
-
25
-
911
Substandard (6)
-
279 752 256 480 1,806 1,286 132 4,991
Doubtful (7)
-
153
-
211
-
49
-
28 441
Loss (8)
-
-
-
-
-
-
-
-
-
Total Loans $ 173,554 $ 143,382 $ 202,613 $ 167,295 $ 93,490 $ 152,535 $ 103,862 $ 10,004 $ 1,046,735
Current period gross chargeoffs $
-
$ 42 $ 25 $ 31 $ 145 $
-
$ 46 $
-
$ 289

F-23

The following tables present the Company's loan portfolio aging analysis as of December 31, 2025 and 2024:

($ in thousands) 30-59 Days 60-89 Days

Greater Than

90 Days

Total Past
December 31, 2025 Past Due Past Due Past Due Due Current Total Loans
Commercial & industrial $ 394 $
-
$ 2,009 $ 2,403 $ 111,475 $ 113,878
Commercial real estate - owner occupied 51
-
429 480 160,606 161,086
Commercial real estate - nonowner occupied 39 141 201 381 435,516 435,897
Agricultural
-
-
-
-
76,514 76,514
Residential real estate 51 1,086 629 1,766 302,975 304,741
HELOC 338 74 88 500 68,673 69,173
Consumer 214 110 10 334 18,968 19,302
Total Loans $ 1,087 $ 1,411 $ 3,366 $ 5,864 $ 1,174,727 $ 1,180,591
30-59 Days 60-89 Days

Greater Than

90 Days

Total Past
December 31, 2024 Past Due Past Due Past Due Due Current Total Loans
Commercial & industrial $ 354 $ - $ 2,927 $ 3,281 $ 121,483 $ 124,764
Commercial real estate - owner occupied
-
-
429 429 134,002 134,431
Commercial real estate - nonowner occupied
-
-
370 370 344,772 345,142
Agricultural
-
-
-
-
64,680 64,680
Residential real estate 215 1,021 787 2,023 306,355 308,378
HELOC 131 15 130 276 53,535 53,811
Consumer 193 27
-
220 15,309 15,529
Total Loans $ 893 $ 1,063 $ 4,643 $ 6,599 $ 1,040,136 $ 1,046,735

All loans past due 90 days are systematically placed on nonaccrual status.

When a loan is moved to nonaccrual status, total unpaid interest accrued to date is reversed from income. Subsequent payments are applied to the outstanding principal balance with the interest portion of the payment recorded on the balance sheet as a contra-loan. Interest received on nonaccrual loans may be realized once all contractual principal amounts are received or when a borrower establishes a history of six consecutive timely principal and interest payments. It is at the discretion of management to determine when a loan is placed back on accrual status upon receipt of six consecutive timely payments.

The categories of nonaccrual loans as of December 31, 2025, and 2024 are presented in the following tables.

December 31, 2025
($ in thousands) Nonaccrual loans with no allowance Nonaccrual loans with an allowance Total nonaccrual loans
Commercial & industrial $ 2,074 $ 182 $ 2,256
Commercial real estate - owner occupied
-
429 429
Commercial real estate - nonowner occupied 342
-
342
Agricultural
-
-
-
Residential real estate 1,227 103 1,330
Home equity line of credit (HELOC) 210
-
210
Consumer 12
-
12
Total loans $ 3,865 $ 714 $ 4,579

F-24

December 31, 2024
($ in thousands) Nonaccrual loans with no allowance Nonaccrual loans with an allowance Total nonaccrual loans
Commercial & industrial $ 2,301 $ 626 $ 2,927
Commercial real estate - owner occupied 7 430 437
Commercial real estate - nonowner occupied 370
-
370
Agricultural
-
-
-
Residential real estate 1,428 111 1,539
Home equity line of credit (HELOC) 231
-
231
Consumer 12
-
12
Total loans $ 4,349 $ 1,167 $ 5,516

Modifications made to Borrowers Experiencing Financial Difficulty

In the normal course of business, the Company may execute loan modifications with borrowers. These modifications are analyzed to determine whether the modification is considered concessionary, long term and made to a borrower experiencing financial difficulty. The Company's modifications generally include interest rate adjustments, principal reductions, and amortization and maturity date extensions. These modifications provide the borrowers with short-term cash relief to allow them to improve their financial condition. If a loan modification is determined to be made to a borrower experiencing financial difficulty, the loan is considered collateral dependent and evaluated as part of the ACL as described above in the "Allowance for Credit Losses" section of this Note.

For the twelve months ended December 31, 2025, the Company did not modify any loans made to borrowers experiencing financial difficulty. The Company had no commitments to lend to borrowers experiencing financial difficulty for which the Company had modified an existing loan as of December 31, 2025.

The Company monitors loan payments on an on-going basis to determine if a loan is considered to have a payment default. Determination of payment default involves analyzing the economic conditions that exist for each customer and its ability to generate positive cash flows during the loan term. For the twelve-month period ended December 31, 2025, the Company had no loan modifications made to borrowers experiencing financial difficulty for which there was a payment default within the 12 months following the modification date.

Unfunded Loan Commitments

The Company maintains an allowance for off-balance sheet credit exposures such as unfunded balances for existing lines of credit, commitments to extend future credit, as well as both standby and commercial letters of credit when there is a contractual obligation to extend credit and when this extension of credit is not unconditionally cancellable (i.e. commitment cannot be canceled at any time). The allowance for off-balance sheet credit exposures is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur, which is based on a historical funding study derived from internal information, and an estimate of expected credit losses on commitments expected to be funded over its estimated life, which are the same loss rates that are used in computing the ACL for loans. The ACL for unfunded loan commitments is classified on the balance sheet within Other liabilities.

The following table presents the balance and activity in the ACL for unfunded loan commitments for the twelve months ended December 31, 2025, and 2024.

($ in thousands) 2025 2024
Balance, beginning of period $ 1,340 $ 776
Adjustment for acquired loans 3
-
Provision for unfunded commitments 29 564
Balance, end of period $ 1,372 $ 1,340

F-25

Related Party Loans

Loans to directors and their related interests, including loans to companies for which directors are principal owners and executive officers are presented in the following table at December 31, 2025, and 2024.

($ in thousands) 2025 2024
Balance at beginning of period $ 450 $ 435
New Term Loans 220
-
Repayment of term loans (321 ) (33 )
Changes in balances of revolving lines of credit (113 ) 48
Balance at end of period $ 236 $ 450

Note 5: Premises and Equipment

Major classifications of premises and equipment stated at cost were as follows at December 31:

($ in thousands) 2025 2024
Land $ 3,882 $ 3,563
Buildings and improvements 29,114 27,798
Equipment 18,862 16,902
Construction in process 36 201
51,894 48,464
Less accumulated depreciation (30,206 ) (28,008 )
Net premises and equipment $ 21,688 $ 20,456

Note 6: Goodwill and Intangibles

On January 17, 2025, the Company acquired The Marblehead Bank of Marblehead, Ohio. The acquisition resulted in approximately $3.9 million in goodwill. The balance of goodwill was $27.2 million at December 31, 2025, and $23.2 million at December 31, 2024.

2025 2024
($ in thousands) Carrying Amount Carrying Amount
Beginning balance $ 23,239 $ 23,239
Acquired goodwill 3,919
-
Ending balance $ 27,158 $ 23,239

F-26

Impairment exists when a reporting unit's carrying value of goodwill exceeds its fair value. Goodwill is tested on the last day of the last quarter of each calendar year. At December 31, 2025, the Company determined that no events had occurred to change the assessment from the quantitative analysis, and it was more likely than not that the fair value of the reporting unit exceeded its carrying value, including goodwill. The qualitative assessment indicated that it was more likely than not that the fair value of the reporting unit exceeded its carrying value, resulting in no impairment.

In connection with the acquisition of Marblehead Bank, $1.7 million of core deposit intangible was recorded. Carrying basis and accumulated amortization of intangible assets were as follows at December 31:

2025 2024
($ in thousands) Gross Carrying Accumulated Gross Carrying Accumulated
Amount Amortization Amount Amortization
Core deposits intangible $ 2,370 $ (540 ) $ 660 $ (303 )
Customer relationship intangible
-
-
-
-
Banking intangibles $ 2,370 $ (540 ) $ 660 $ (303 )

Amortization expense for intangibles for the years ended December 31, 2025, and 2024 was $0.24 million and $0.07 million, respectively. Estimated amortization expense for each of the following five years is reflected in the table below.

($ in thousands) Amortization
2026 $ 237
2027 237
2028 237
2029 237
2030 237
Total $ 1,185

Note 7: Mortgage Banking and Servicing Rights

Mortgage loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid principal balance of mortgage loans serviced for others approximated $1.5 billion at December 31, 2025, and $1.4 million at December 31, 2024. Contractually specified servicing fees of approximately $3.6 million and $3.5 million were included in mortgage loan servicing fees in the consolidated income statement for the years ended December 31, 2025, and 2024, respectively.

The following table summarizes mortgage servicing rights capitalized and related amortization, along with activity in the related valuation allowance at December 31:

($ in thousands) 2025 2024
Carrying amount, beginning of year $ 14,868 $ 13,906
Mortgage servicing rights capitalized during the year 2,464 2,256
Mortgage servicing rights amortization during the year (1,789 ) (1,335 )
Net change in valuation allowance (289 ) 41
Carrying amount, end of year $ 15,254 $ 14,868
Valuation allowance:
Beginning of year $ 186 $ 227
Increase (reduction) 289 (41 )
End of year $ 475 $ 186
Fair value, beginning of period $ 17,782 $ 17,125
Fair value, end of period $ 17,964 $ 17,782

F-27

Note 8: Derivative Financial Instruments

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company manages its exposures to a wide variety of business and operational risks primarily through management of its core business activities. The Company manages economic risks, including interest rate, liquidity and credit risk, primarily by managing the amount, sources and duration of its assets and liabilities and through the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company's derivative financial instruments are used to manage differences in the amount, timing and duration of the Company's known or expected cash payments principally related to certain variable-rate assets.

The Company does not use derivatives for trading or speculative purposes. Derivatives not designated as hedges are not speculative and result from a service the Company provides to certain customers. The Company executes interest rate swaps with commercial banking customers to facilitate their respective risk management strategies. Those interest rate swaps are simultaneously hedged by offsetting interest rate swaps that the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions. As the interest rate swaps associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings.

Additionally, the Company enters into forward contracts for the future delivery of mortgage loans to third-party investors and enters into IRLCs with potential borrowers to fund specific mortgage loans that will be sold into the secondary market. The forward contracts that are entered into, economically hedge the effect of changes in interest rates resulting from the Company's commitment to fund the loans. The IRLCs and forward contracts are not designated as accounting hedges and are recorded at fair value with changes in fair value reflected in noninterest income on the consolidated statements of income. The fair value of derivative instruments with a positive fair value are reported in accrued income and other assets in the consolidated balance sheets, while derivative instruments with a negative fair value are reported in accrued expenses and other liabilities in the consolidated balance sheets.

The table below presents the notional amount and fair value of the Company's interest rate swaps, IRLCs and forward contracts utilized at December 31:

2025 2024
($ in thousands) Notional Fair Notional Fair
Amount Value Amount Value
Asset Derivatives
Derivatives not designated as hedging instruments
Interest rate swaps associated with loans $ 118,701 $ 1,465 $ 79,235 $ 4,029
IRLCs 10,701 15
-
-
Forward contracts 11,000 69
Total contracts $ 129,402 $ 1,480 $ 90,235 $ 4,098
Liability Derivatives
Derivatives not designated as hedging instruments
Interest rate swaps associated with loans $ 118,701 $ (1,465 ) $ 79,235 $ (4,029 )
IRLCs 7,412 (21 )
Forward contracts 11,000 (30 )
-
-
Total contracts $ 129,701 $ (1,495 ) $ 86,647 $ (4,050 )

F-28

The fair value of interest rate swaps were estimated using a discounted cash flow method that incorporates current market interest rates as of the balance sheet date. Fair values of IRLCs and forward contracts were estimated using changes in mortgage interest rates from the date the Company entered into the IRLC and the balance sheet date.

The following table presents the amounts included in the consolidated statements of income for non-hedging derivative financial instruments for the twelve months ended December 31, 2025, and 2024.

Amount of gain (loss)
($ in thousands) Statement of income classification 2025 2024
Interest rate swap contracts Other income $ 423 $ 240
IRLCs Gain on sale of mortgage loans & OMSR 39 (66 )
Forward contracts Gain on sale of mortgage loans & OMSR (99 ) 105

The following table shows the offsetting of financial assets and derivative assets at December 31, 2025, and 2024.

($ in thousands)

Gross

amounts of

Gross amounts
offset in the 		Net amounts of
assets
presented in the 		Gross amounts not offset in
the consolidated balance sheet
recognized
assets 		consolidated
balance sheet 		consolidated
balance sheet 		Financial
instruments 		Cash collateral
received 		Net amount
December 31, 2025
Interest rate swaps $ 2,525 $ 1,060 $ 1,465 $
-
$ 1,220 $ 245
December 31, 2024
Interest rate swaps $ 4,172 $ 143 $ 4,029 $
-
$ 3,130 $ 899

The following table shows the offsetting of financial liabilities and derivative liabilities at December 31, 2025, and 2024.

($ in thousands)

Gross

amounts of

Gross amounts
offset in the 		Net amounts of
liabilities
presented in the 		Gross amounts not offset in
the consolidated balance sheet
recognized
liabilities 		consolidated
balance sheet 		consolidated
balance sheet 		Financial
instruments 		Cash collateral
pledged 		Net amount
December 31, 2025
Interest rate swaps $ 2,525 $ 1,060 $ 1,465 $
-
$
-
$ 1,465
December 31, 2024
Interest rate swaps $ 4,172 $ 143 $ 4,029 $
-
$
-
$ 4,029

Note 9: Interest-Bearing Deposits

Interest-bearing time deposits in denominations of $250,000 or more totaled $56.1 million on December 31, 2025, and $53.7 million on December 31, 2024.

At December 31, 2025, the scheduled maturities of time deposits were as follows:

($ in thousands)
2026 $ 218,814
2027 51,113
2028 2,422
2029 460
2030 491
Thereafter
-
Total $ 273,300

F-29

Included in time deposits at December 31, 2025 and 2024 were $49.9 million and $58.2 million, respectively, of deposits which were obtained through the Certificate of Deposit Account Registry Service ("CDARS"). This service allows deposit customers to maintain fully insured balances in excess of the $250,000 FDIC insurance limit without the inconvenience of having multi-banking relationships. Under the reciprocal program that the Company is currently participating in, customers agree to allow their deposits to be placed with other participating banks in the CDARS program in insurable amounts under $250,000. In exchange, other banks in the program agree to place their deposits with the Company also in insurable amounts under $250,000.

Deposits of directors and their associates, including deposits of companies for which directors are principal owners and executive officers, totaled $3.8 million and $4.3 million at December 31, 2025, and 2024, respectively.

Note 10: Short-Term Borrowings

($ in thousands) 2025 2024
Securities Sold Under Repurchase Agreements $ 9,230 $ 10,585

The Company has retail repurchase agreements to facilitate cash management transactions with commercial customers. These obligations were secured by agency securities of $5.2 million and $3.9 million as of December 31, 2025, and 2024, respectively, and mortgage-backed securities of $20.8 million and $13.4 million as of December 31, 2025 and 2024, respectively. The collateral is held at the FHLB and has maturities from 2027 through 2061. At December 31, 2025, these repurchase agreements totaled $9.2 million. The maximum amount of outstanding agreements at any month end during 2025 and 2024 totaled $16.7 million and $26.9 million, respectively, and the monthly average of such agreements totaled $12.0 million and $14.3 million during 2025 and 2024, respectively. The repurchase agreements mature within one month.

The Company has borrowing capabilities at the Federal Reserve Discount Window ("Discount Window") by pledging either securities or loans as collateral. As of December 31, 2025, there were no borrowings drawn at the Discount Window.

At December 31, 2025 and 2024, the Company had $41.0 million in federal funds lines, of which none were drawn.

Note 11: Federal Home Loan Bank (FHLB) Advances

The FHLB advances were secured by $313.1 million in mortgage loans at December 31, 2025. Advances consisted of fixed and variable interest rates from 3.75 to 4.61 percent. Fixed rate advances are subject to restrictions or penalties in the event of prepayment. Aggregate annual maturities of FHLB advances at December 31, 2025, were:

($ in thousands) Debt
2026 $ 12,500
2027 5,000
2028 17,500
Total $ 35,000

Note 12: Trust Preferred Securities

On September 15, 2005, RST II, a wholly-owned subsidiary of the Company, closed a pooled private offering of 10,000 Capital Securities with a liquidation amount of $1,000 per security. The proceeds of the offering were loaned to the Company in exchange for junior subordinated debentures with terms similar to the Capital Securities. Distributions on the Capital Securities are payable quarterly at a variable rate that is currently based upon the 3-month CME Group Benchmark Administration ("CME") Term Secured Overnight Financing Rate ("SOFR") as adjusted by the relevant spread adjustment plus 1.80 percent and are included in interest expense in the Consolidated Financial Statements. These securities may be included in Tier 1 capital and may be prepaid at any time without penalty (with certain limitations applicable) under current regulatory guidelines and interpretations. The balance of the Capital Securities as of December 31, 2025, and 2024 was $10.3 million, with a maturity date of September 15, 2035.

F-30

Note 13: Subordinated Debt

On May 27, 2021, the Company entered into Subordinated Note Purchase Agreements with qualified institutional buyers and accredited investors pursuant to which the Company issued and sold $20.0 million in aggregate principal amount of its 3.65% Fixed to Floating Rate Subordinated Notes due 2031 (the "Notes"). The Notes were sold by the Company in a private placement exempt from the registration requirements under the Securities Act of 1933, as amended.

The Notes mature on June 1, 2031, and bear interest at a fixed rate of 3.65% through May 31, 2026. From June 1, 2026, to the maturity date or earlier redemption of the Notes, the interest rate will reset quarterly to an interest rate per annum, equal to the then-current-three-month SOFR provided by the Federal Reserve Bank of New York plus 296 basis points. The Company may redeem the Notes at any time after May 31, 2026, and at any time in whole, but not in part, upon the occurrence of certain events. Any redemption of the Notes will be subject to prior regulatory approval. The Company incurred debt issuance costs for placement fees, legal and other out-of-pocket expenses of approximately $0.5 million, which are being amortized over the life of the Notes. There is $0.3 million of unamortized expense as of December 31, 2025.

Note 14: Income Taxes

The provision for income taxes includes these components:

For The Year Ended
December 31,
($ in thousands) 2025 2024
Current expense
Federal $ 3,392 $ 369
Current income tax expense 3,392 369
Deferred expense
Federal (111 ) 2,017
Deferred income tax expense (111 ) 2,017
Income tax expense $ 3,281 $ 2,386

A reconciliation of income tax expense at the statutory rate to the Company's actual income tax expense is shown below:

For The Year Ended December 31,
($ in thousands) 2025 2024
US federal statutory income tax rate $ 3,624 21.0 % $ 2,910 21.0 %
State and local income taxes - net of federal income tax effect*
-
0.00 %
-
0.00 %
Tax credits
Low-income housing tax credits (89 ) -0.52 % (89 ) -0.64 %
Amortization of LIHTC Investments net of other benefits 78 0.40 % 78 0.50 %
Nontaxable and nondeductible items
Tax-exempt interest income net of disallowed interest expense (103 ) -0.60 % (111 ) -0.80 %
BOLI income (162 ) -0.94 % (161 ) -1.16 %
Captive premium income (117 ) -0.68 % (147 ) -1.06 %
Other nontaxable and nondeductible items 50 0.34 % (94 ) -0.61 %
Income tax expense; effective tax rate $ 3,281 19.00 % $ 2,386 17.23 %
* The majority of the Company's activities for 2025 and 2024 are sourced to states that do not impose an income tax on financial institutions.

Given Company's business activity, there were no State and local income tax, net of federal (national) income tax effect; Foreign tax effects; Effect of changes in tax laws or rates enacted in the current period; Effect of cross-border tax laws; valuation allowances; unrecognized tax benefits.

F-31

Income taxes paid were as follows:

For The Year Ended
December 31,
($ in thousands) 2025 2024
Federal $ 2,050 $ 417
State and local
-
-
Total $ 2,050 $ 417

The tax effects of temporary differences related to deferred taxes shown on the balance sheets are:

For The Year Ended
December 31,
($ in thousands) 2025 2024
Deferred tax assets
Allowance for credit losses $ 3,383 $ 3,170
Unrealized losses on available-for-sale securities 5,710 8,037
Capitalized research and development costs
-
102
Accrued bonus 363 120
Net operating loss 296 791
Unearned loan fees 115
-
Other 968 911
10,835 13,131
Deferred tax liabilities
Depreciation (1,097 ) (849 )
Mortgage servicing rights (3,203 ) (3,122 )
Purchase accounting adjustments (1,964 ) (1,475 )
Prepaids (457 ) (434 )
Net deferred loan costs
-
(31 )
Section 475 MTM (5,710 ) (8,037 )
FHLB stock dividends (67 ) (67 )
(12,498 ) (14,015 )
Net deferred tax liability $ (1,663 ) $ (884 )

At December 31, 2024, the Company had $3.8 million in net operating losses. During 2025, the Company acquired Net Operating Losses with a remaining balance of $1.4 million. The Net Operating Losses is subject to an annual limitation of $171 thousand with no expiration period..

Note 15: Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss represents reclassifications out of unrealized gains and losses on available-for-sale securities net of income tax. There were no reclassifications for the years ending December 31, 2025, and 2024.

Note 16: Regulatory Matters

As of December 31, 2025, based on its call report computations, State Bank was classified as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, State Bank must maintain capital ratios as set forth in the table below. There are no conditions or events since December 31, 2025, that management believes have changed State Bank's capital classification.

F-32

State Bank's actual capital amounts and ratios are presented in the following table. Capital levels are presented for State Bank only as the Company is exempt from quarterly reporting at the holding company level:

Actual For Capital Adequacy
Purposes 		To Be Well Capitalized Under Prompt Corrective Action Procedures
($ in thousands) Amount Ratio Amount Ratio Amount Ratio
As of December 31, 2025
Tier I Capital to average assets $ 151,592 9.86 % $ 61,486 4.0 % $ 76,857 5.0 %
Tier I Common equity capital to risk-weighted assets $ 151,592 11.78 % $ 57,902 4.5 % $ 83,636 6.5 %
Tier I Capital to risk-weighted assets $ 151,592 11.78 % $ 77,202 6.0 % $ 102,937 8.0 %
Total Risk-based capital to risk-weighted assets $ 167,693 13.03 % $ 102,937 8.0 % $ 128,671 10.0 %
As of December 31, 2024
Tier I Capital to average assets $ 156,122 11.09 % $ 56,290 4.0 % $ 70,363 5.0 %
Tier I Common equity capital to risk-weighted assets $ 156,122 13.43 % $ 52,297 4.5 % $ 75,541 6.5 %
Tier I Capital to risk-weighted assets $ 156,122 13.43 % $ 69,730 6.0 % $ 92,973 8.0 %
Total Risk-based capital to risk-weighted assets $ 170,672 14.69 % $ 92,973 8.0 % $ 116,216 10.0 %

The above minimum capital requirements exclude the capital conservation buffer required to be maintained in order to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers. The capital conservation buffer was 2.50 percent at both December 31, 2025, and December 31, 2024. The Company's capital ratios exceeded the minimum capital requirements by more than the 2.50 percent capital conservation buffer at December 31, 2025, and December 31, 2024. The net unrealized gain or loss on available-for-sale securities is not included in computing regulatory capital. Management believes that State Bank met all capital adequacy requirements to which State Bank was subject as of December 31, 2025.

Note 17: Employee Benefits

The Company has a share-based incentive compensation plan that permits the grant of stock options, restricted stock and other share-based awards to employees, directors and advisory board members of the Company and its subsidiaries. In addition, the Company has instituted a long-term incentive program, with the objective of rewarding senior management through grants of restricted common shares of the Company (see Note 18 to the Consolidated Financial Statements).

The Company has a retirement savings 401(k) plan covering substantially all employees. The Company provides a safe harbor matching contribution equal to 100% of an employees' salary deferral amounts up to 4% of the employees' eligible compensation. Employees are immediately vested in their voluntary contributions and in any Company safe harbor matching contributions. Any discretionary contribution made by the Company is fully vested after three years of credited service. Employer contributions charged to expense for 2025 and 2024 were $0.7 million and $0.6 million, respectively.

F-33

Also, the Company has Supplemental Executive Retirement Plan ("SERP") Agreements with certain active and retired officers. The agreements provide monthly payments for up to 15 years that equal 15 percent to 25 percent of average compensation prior to retirement or death. The charges to expense for the current agreements were $0.1 million and $0.2 million for 2025 and 2024, respectively.

Additional life insurance is provided to certain officers through bank-owned life insurance ("BOLI") policies. By way of a separate split-dollar agreement, each policy's interests are divided between the Company and the insured's beneficiary. The Company owns the policy's cash value and a portion of the policy net death benefit, over and above the cash value assigned to the insured's beneficiary. In September 2025, an additional $0.8 million in BOLI policies were purchased. The cash surrender value of all life insurance policies totaled $32.2 million and $30.7 million at December 31, 2025 and 2024, respectively.

The Company has a noncontributory employee stock ownership plan ("ESOP") covering substantially all employees of the Company and its subsidiaries. Voluntary contributions are made by the Company to the plan. Each eligible employee is vested based upon years of service, including prior years of service. The Company's contributions to the account of each employee become fully vested after three years of service. Benefit expense for the value of the stock purchased is recorded equal to the fair market value of the stock when contributions, which are determined annually by the Board of Directors of the Company, are made to the ESOP. Allocated shares in the ESOP at December 31, 2025 and 2024, were 258,196 and 304,286, respectively.

Dividends on allocated shares in the ESOP are recorded as dividends and charged to retained earnings. Compensation expense is recorded equal to the fair market value of the stock when contributions, which are determined annually by the Board of Directors of the Company, are made to the ESOP. ESOP expense for the years ended December 31, 2025 and 2024, was $0.2 million and $0.0 million, respectively.

Note 18: Share-Based Compensation Plan

In April 2017, the shareholders approved a new share-based incentive compensation plan, the SB Financial Group, Inc. 2017 Stock Incentive Plan (the "2017 Plan"). This plan permits the grant or award of incentive stock options, nonqualified stock options, stock appreciation rights ("SAR's"), restricted stock, and restricted stock units ("RSU's") for up to 500,000 common shares of the Company.

The 2017 Plan is intended to advance the interests of the Company and its shareholders by offering employees, directors and advisory board members of the Company and its subsidiaries an opportunity to acquire or increase their ownership interest in the Company through grants of equity-based awards. The 2017 Plan permits equity-based awards to be used to attract, motivate, reward and retain highly competent individuals upon whose judgment, initiative, leadership and efforts are key to the success of the Company by encouraging those individuals to become shareholders of the Company.

Option awards are granted with an exercise price equal to the market price of the Company's common shares at the date of grant and those option awards vest based on five years of continuous service and have 10-year contractual terms. The fair value of each option award is estimated on the date of grant using the Black-Scholes valuation model. There were no options granted in 2025 or 2024. There were no stock options outstanding as of December 31, 2025, or 2024, and no compensation expense was charged against income with respect to option awards under the 2017 Plan for the years ended December 31, 2025, or 2024.

As of December 31, 2025, there was no unrecognized compensation cost related to incentive option share-based compensation arrangements granted under the 2017 Plan.

Pursuant to the Long Term Incentive ("LTI") Plan, the Company awards restricted common shares of the Company under the 2017 Plan to certain key executives. These restricted stock awards vest over a four-year period and are intended to assist the Company in retention of key executives. During 2025 and 2024, the Company met certain performance targets and restricted stock awards were approved by the Board. The compensation cost charged against income for the LTI Plan was $0.5 million and $0.6 million for 2025 and 2024, respectively. The total income tax benefit recognized in the income statement for share-based compensation arrangements was $0.1 million and $0.1 million for 2025 and 2024, respectively.

F-34

A summary of restricted stock activity under the Company's LTI Plan for the year ended December 31, 2025, is presented below:

Shares Weighted-Average Value per Share
Nonvested, January 1, 2025 54,311 $ 17.15
Granted 28,715 22.71
Vested (33,316 ) 19.41
Forfeited (10,072 ) 18.01
Nonvested, December 31, 2025 39,638 $ 19.05

As of December 31, 2025, there was $0.5 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements related to the restricted stock awards under the 2017 Plan which were granted in accordance with the LTI Plan. That cost is expected to be recognized over a weighted-average period of 1.89 years.

Note 19: Disclosures About Fair Value of Assets and Liabilities

Pursuant to ASC 820, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three level hierarchy exists in ASC 820 for fair value measurements based upon the inputs to the valuation of an asset or liability:

Level 1: Quoted prices in active markets for identical assets or liabilities

Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a recurring basis, recognized in the accompanying balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy.

Available-for-sale securities

The fair value of available-for-sale securities are determined by various valuation methodologies. Level 2 securities include obligations of U.S. government agencies, mortgage-backed securities, obligations of political and state subdivisions, and corporate securities. Level 2 inputs do not include quoted prices for individual securities in active markets; however, they do include inputs that are either directly or indirectly observable for the individual security being valued. Such observable inputs include interest rates and yield curves at commonly quoted intervals, volatilities, prepayment speeds, credit risks and default rates. Also included are inputs derived principally from or corroborated by observable market data by correlation or other means.

Interest rate contracts

The fair values of interest rate contracts are based upon the estimated amount the Company would receive or pay to terminate the contracts or agreements, taking into account underlying interest rates, creditworthiness of underlying customers for credit derivatives and, when appropriate, the creditworthiness of the counterparties.

Forward contracts

The fair values of forward contracts on to-be-announced securities are determined using quoted prices in active markets or benchmarked thereto (Level 1).

Interest Rate Lock Commitments (IRLCs)

The fair value of IRLCs are determined using the projected sale price of individual loans based on changes in the market interest rates, projected pull-through rates (the probability that an IRLC will ultimately result in an originated loan), the reduction in the value of the applicant's option due to the passage of time, and the remaining origination costs to be incurred based on management's estimate of market costs (Level 3).

F-35

The following table presents the fair value measurements of securities measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fell at December 31, 2025 and 2024:

($ in thousands) Fair value at
December 31, 2025 		(Level 1) (Level 2) (Level 3)
U.S. Treasury and Government Agencies $ 5,203 $
-
$ 5,203 $
-
Mortgage-backed securities 159,952
-
159,952
-
State and political subdivisions 9,849
-
9,849
-
Other corporate securities 13,622
-
13,622
-
Interest rate contracts - assets 1,465
-
1,465
-
Interest rate contracts - liabilities (1,465 )
-
(1,465 )
-
Forward contracts (30 ) (30 )
-
-
IRLCs 15
-
-
15
($ in thousands) Fair value at
December 31, 2024 		(Level 1) (Level 2) (Level 3)
U.S. Treasury and Government Agencies $ 7,389 $
-
$ 7,389 $
-
Mortgage-backed securities 169,620
-
169,620
-
State and political subdivisions 9,407
-
9,407
-
Other corporate securities 15,171
-
15,171
-
Interest rate contracts - assets 4,029
-
4,029
-
Interest rate contracts - liabilities (4,029 )
-
(4,029 )
-
Forward contracts 69 69
-
-
IRLCs (21 )
-
-
(21 )

Level 1 - quoted prices in active markets for identical assets

Level 2 - significant other observable inputs

Level 3 - significant unobservable inputs

The following table reconciles the beginning and ending balances of recurring fair value measurements recognized in the accompanying consolidated balance sheets using significant unobservable (Level 3) inputs for the years ended December 31, 2025, and 2024.

for the Twelve Months Ended
December 31,
($ in thousands) 2025 2024
Interest rate lock commitments
Balance at beginning of period $ (21 ) $ 45
Change in fair value 36 (66 )
Balance at end of period $ 15 $ (21 )

The following is a description of the valuation methodologies and inputs used for assets measured at fair value on a nonrecurring basis and recognized in the accompanying balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy.

Collateral-Dependent Individually Evaluated Loans, Net of ACL

Loans for which it is probable the Company will not collect all principal and interest due according to contractual terms are measured for collateral dependency. The estimated fair value of collateral-dependent loans is based on the appraised value of the collateral, less estimated cost to sell. Collateral-dependent loans are classified within Level 3 of the fair value hierarchy. This method requires obtaining independent appraisals of the collateral from a list of preapproved appraisers, which are reviewed for accuracy and consistency by the Company. The appraised values are reduced by applying a discount factor to the value based on the Company's loan review policy. All individually evaluated loans held by the Company were collateral dependent at December 31, 2025 and 2024.

F-36

Mortgage Servicing Rights

Mortgage servicing rights do not trade in an active, open market with readily observable prices. Accordingly, fair value is estimated using discounted cash flow models associated with the servicing rights and discounting the cash flows using discount market rates, prepayment speeds and default rates. The servicing portfolio has been valued using all relevant positive and negative cash flows including servicing fees, miscellaneous income and float; marginal costs of servicing; the cost of carry of advances; and foreclosure losses; and applying certain prevailing assumptions used in the marketplace. Due to the nature of the valuation inputs, mortgage servicing rights are classified within Level 3 of the hierarchy. These mortgage servicing rights are tested for impairment on a quarterly basis.

The following tables presents the fair value measurements of assets measured at fair value on a non-recurring basis and the level within the fair value hierarchy in which the fair value measurements fell at December 31, 2025 and 2024:

($ in thousands) Fair value at
December 31, 2025 		(Level 1) (Level 2) (Level 3)
Collateral-dependent Individually evaluated loans $ 955 $
-
$
-
$ 955
Mortgage servicing rights 5,813
-
-
5,813
($ in thousands) Fair value at
December 31, 2024 		(Level 1) (Level 2) (Level 3)
Collateral-dependent Individually evaluated loans $ 1,167 $
-
$
-
$ 1,167
Mortgage servicing rights 1,814
-
-
1,814

Level 1 - quoted prices in active markets for identical assets

Level 2 - significant other observable inputs

Level 3 - significant unobservable inputs

Unobservable (Level 3) Inputs

The following tables present quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements at December 31, 2025 and 2024:

($ in thousands) Fair value at
December 31, 2025 		Valuation technique Unobservable inputs Range (weighted-
average)
Collateral-dependent individually evaluated loans $ 955 Market comparable properties Comparability adjustments (%) 1 - 19% (12%)
Mortgage servicing rights 5,813 Discounted cash flow Discount rate 10.38%
Constant prepayment rate 7.34%
P&I earnings credit 3.73%
T&I earnings credit 3.93%
Inflation for cost of servicing 3.50%
IRLCs 15 Discounted cash flow Loan closing rates 43% - 99%

F-37

($ in thousands) Fair value at
December 31, 2024 		Valuation
technique 		Unobservable inputs Range (weighted- average)
Collateral-dependent individually evaluated loans $ 1,167 Market comparable properties Comparability adjustments (%) 24 - 404% (84%)
Mortgage servicing rights 1,814 Discounted cash flow Discount rate 11.13%
Constant prepayment rate 7.30%
P&I earnings credit 4.44%
T&I earnings credit 4.49%
Inflation for cost of servicing 3.50%
IRLCs (21 ) Discounted cash flow Loan closing rates 64% - 99%

The mortgage servicing rights portfolio is measured for fair value by an independent third party. The valuation of the portfolio hinges on a number of quantitative factors. These factors include, but are not limited to, a discount rate applied to the cash flows, and an assumption of future principal prepayments. The prepayment assumptions are based upon the historical performance of the Company's portfolio as well as market metrics.

The following methods were used to estimate the fair value of all other financial instruments recognized in the accompanying balance sheets at amounts other than fair value.

Cash and Due From Banks, Interest Bearing Time Deposits, FRB and FHLB Stock and Interest Receivable and Payable

Fair value is determined to be the carrying amount for these items (which include cash on hand, due from banks, and federal funds sold) because they represent cash or mature in 90 days or less, and do not represent unanticipated credit concerns.

Loans Held for Sale

The fair value of loans held for sale is based upon quoted market prices, where available, or is determined by discounting estimated cash flows using interest rates approximating the Company's current origination rates for similar loans and adjusted to reflect the inherent credit risk.

Loans

The estimated fair value of loans follows the guidance in ASU 2016-01, which prescribes an "exit price" approach in estimating and disclosing fair value of financial instruments. The fair value calculation at that date discounted estimated future cash flows using rates that incorporated discounts for credit, liquidity, and marketability factors.

Deposits, Repurchase Agreements and FHLB Advances

Deposits include demand deposits, savings accounts and certain money market deposits. The carrying amount approximates the fair value. The estimated fair value for fixed-maturity time deposits, as well as borrowings, is based on estimates of the rate the Company could pay on similar instruments with similar terms and maturities at December 31, 2025 and 2024.

F-38

Loan Commitments

The fair value of commitments is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. The estimated fair values for other financial instruments and off-balance-sheet loan commitments approximate cost at December 31, 2025 and 2024 and are not considered significant to this presentation.

Trust Preferred Securities

The fair value for Trust Preferred Securities is estimated by discounting the cash flows using an appropriate discount rate.

Subordinated Debt

The fair value for Subordinated Debt is estimated by discounting the cash flows using an appropriate discount rate.

The following tables present estimated fair values of the Company's financial instruments. The fair values of certain instruments were calculated by discounting expected cash flows, which involves significant judgments by management and uncertainties. Fair value is the estimated amount at which financial assets or liabilities could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Because no market exists for these financial instruments, and because management does not intend to sell these financial instruments, the Company does not know whether the fair values shown below represent values at which the respective financial instruments could be sold individually or in the aggregate.

($ in thousands) Carrying Fair Fair value measurements using
December 31, 2025 Amount value (Level 1) (Level 2) (Level 3)
Financial assets
Cash and due from banks $ 71,543 $ 71,543 $ 71,543 $
-
$
-
Interest bearing time deposits 1,140 1,140
-
1,140
-
Loans held for sale 1,761 1,779
-
1,779
-
Loans, net of allowance for credit losses 1,164,477 1,127,003
-
-
1,127,003
Federal Reserve and FHLB Bank stock, at cost 5,610 5,610
-
5,610
-
Interest receivable 5,490 5,490
-
5,490
-
Financial liabilities
Deposits $ 1,307,244 $ 1,307,177 $ 1,033,944 $ 273,233 $
-
Repurchase agreements 9,230 9,230
-
9,230
-
FHLB advances 35,000 35,121
-
35,121
-
Trust preferred securities 10,310 8,644
-
8,644
-
Subordinated debt, net of issuance costs 19,739 19,051
-
19,051
-
Interest payable 2,460 2,460
-
2,460
-
($ in thousands) Carrying Fair Fair value measurements using
December 31, 2024 amount value (Level 1) (Level 2) (Level 3)
Financial assets
Cash and due from banks $ 25,928 $ 25,928 $ 25,928 $
-
$
-
Interest bearing time deposits 1,565 1,565
-
1,565
-
Loans held for sale 6,770 6,861
-
6,861
-
Loans, net of allowance for credit losses 1,031,639 1,033,064
-
-
1,033,064
Federal Reserve and FHLB Bank stock, at cost 5,223 5,223
-
5,223
-
Interest receivable 4,908 4,908
-
4,908
-
Financial liabilities
Deposits $ 1,152,605 $ 1,155,747 $ 893,388 $ 262,359 $
-
Repurchase agreements 10,585 10,585
-
10,585
-
FHLB advances 35,000 34,782
-
34,782
-
Trust preferred securities 10,310 9,495
-
9,495
-
Subordinated debt, net of issuance costs 19,690 19,155
-
19,155
-
Interest payable 2,351 2,351
-
2,351
-

F-39

Note 20: Business Combinations

Effective January 17, 2025, the Company acquired all of the outstanding common shares of Marblehead Bancorp and its subsidiary The Marblehead Bank of Marblehead, Ohio (collectively, "Marblehead"). Marblehead was headquartered in Marblehead, Ohio and had two retail offices. At closing, Marblehead Bancorp was merged with and into SBFG, with SBFG surviving, and immediately thereafter, The Marblehead Bank was merged with and into State Bank, with State Bank surviving. Under the terms of the merger agreement, shareholders of Marblehead received fixed consideration of $196.31 in cash for each share of Marblehead common stock for total consideration of $5.0 million. The acquisition of Marblehead enabled the Company to increase both its deposit and loan base and acquire new households in a new market. It is expected that this transaction will result in business synergies and economies of scale. The acquisition was consistent with the Company's strategy to expand its presence in Northwest Ohio and to increase profitability by introducing existing products and services to the acquired customer base.

The Company accounted for the transaction under the acquisition method of accounting, which means that the acquired assets and liabilities were recorded at fair value at the date of acquisition. In accordance with ASC 805, the Company expensed approximately $0.7 million of direct acquisition costs during the twelve months ended December 31, 2025. The $0.7 million in merger expense is split between data processing and professional fees expense. As a result of the acquisition, the Company recorded $3.9 million of goodwill and $1.7 million of intangible assets in the first quarter of 2025. The intangible assets are related to core deposits, which are being amortized over 10 years on a straight-line basis. Loans acquired with deteriorated credit quality ("PCD loans") since origination were not material. For tax purposes, goodwill is nondeductible but will be evaluated annually for impairment.

The following table summarizes the fair value of the total consideration transferred as part of the acquisition as well as the fair value of identifiable assets and liabilities assumed as of the effective date of the transaction based on assumptions that are subject to change as management continues to evaluate as relevant information becomes available. If, prior to the end of the one-year measurement period for finalizing the purchase price allocation, relevant information becomes available which would indicate adjustments are required to the purchase price allocation, such adjustments will be recorded in the reporting period in which the adjustment amounts are determined. Potential adjustments, if any, will be related to assets that may have changes to valuation amounts that were not readily determinable at the acquisition date.

($ in thousands) January 17, 2025
Fair value of assets acquired
Cash and cash equivalents $ 1,995
Investment securities 30,123
Federal Reserve and Federal Home Loan Bank stock 117
Loans held for investment 18,661
Premises and equipment 1,036
Goodwill 3,919
Core deposit intangible 1,710
Other assets 1,600
Total assets acquired $ 59,161
Fair value of liabilities assumed
Deposits $ 53,088
Other liabilities 1,064
Total liabilities assumed 54,152
Total purchase price (cash) $ 5,009

Pro Forma Financial Information

The results of operations of Marblehead have been included in the Company's consolidated financial statements since the acquisition date of January 17, 2025. The following schedule includes the pro forma results for December 31, 2025, and 2024, as if the Marblehead acquisition had occurred as of the beginning of the reporting periods presented.

Twelve Months Ended
Summary of Operations ($ in thousands) Dec. 2025 Dec. 2024
Net interest income $ 48,513 $ 41,272
Provision for loan losses 1,306 136
Net interest income after provision $ 47,207 $ 41,136
Non interest income 17,111 17,094
Non interest expense 47,258 44,831
Income before income taxes $ 17,060 $ 13,399
Income tax expense* 3,281 2,386
Net income to common shareholders $ 13,779 $ 11,013
Basic earnings per share $ 2.16 $ 1.65
Diluted earnngs per share $ 2.16 $ 1.65
* Income tax expense for Marblehead calculated using a 21% statutory rate

F-40

Note 21: Parent Company Financial Information

Presented below is condensed financial information of the parent company only:

Condensed Balance Sheets

($ in thousands) 2025 2024
Assets
Cash & cash equivalents $ 6,873 $ 1,339
Investment in banking subsidiaries 156,678 147,057
Investment in nonbanking subsidiaries 6,205 6,451
Other assets 2,049 2,846
Total assets $ 171,805 $ 157,693
Liabilities
Trust preferred securities $ 10,000 $ 10,000
Sub debt net of issuance cost 19,739 19,690
Borrowings from nonbanking subsidiaries 310 310
Other liabilities & accrued interest payable 520 185
Total liabilities 30,569 30,185
Shareholders' equity 141,236 127,508
Total liabilities and shareholders' equity $ 171,805 $ 157,693

Condensed Statements of Income

($ in thousands) 2025 2024
Dividends from subsidiaries:
Banking subsidiaries $ 20,000 $ 5,000
Nonbanking subsidiaries 750
-
Total income 20,750 5,000
Expenses
Interest expense 1,419 1,506
Other expense 2,520 1,854
Total expenses 3,939 3,360
Income before income tax 16,811 1,640
Income tax benefit (790 ) (693 )
Income before equity in undistributed income of subsidiaries 17,601 2,333
Equity in undistributed income of subsidiaries
Banking subsidiaries (4,132 ) 7,960
Nonbanking subsidiaries 505 1,177
Total (3,627 ) 9,137
Net income $ 13,974 $ 11,470

F-41

Condensed Statements of Comprehensive Income

($ in thousands) 2025 2024
Net income $ 13,974 $ 11,470
Other comprehensive income:
Available-for-sale investment securities:
Gross unrealized holding gain (loss) arising in the period 11,081 (510 )
Related tax (expense) benefit (2,328 ) 107
Net effect on other comprehensive income (loss) 8,753 (403 )
Total comprehensive income $ 22,727 $ 11,067

Condensed Statements of Cash Flows

($ in thousands) 2025 2024
Operating activities
Net income $ 13,974 $ 11,470
Items not requiring (providing) cash
Equity in undistributed net income of subsidiaries 3,628 (9,245 )
Stock compensation expense 536 637
Other assets 1,547 887
Other liabilities 335 (496 )
Net cash provided by operating activities 20,020 3,253
Investing activities
Capital contributed to banking subsidiary (5,000 )
-
Return of capital from nonbanking subsidiary
-
108
Net cash provided by (used in) investing activities (5,000 ) 108
Financing activities
Dividends on common shares (3,849 ) (3,770 )
Repurchase of common shares (5,686 ) (4,768 )
Other financing activities 49 48
Net cash used in financing activities (9,486 ) (8,490 )
Net change in cash and cash equivalents 5,534 (5,129 )
Cash and cash equivalents at beginning of year 1,339 6,468
Cash and cash equivalents at end of year $ 6,873 $ 1,339

F-42

Note 22: Quarterly Financial Information (unaudited)

Quarterly Financial Information (unaudited)

Years ended December 31,

($ in thousands, except per share data)
2025 December September June March
Interest income $ 19,272 $ 18,809 $ 18,467 $ 17,372
Interest expense 6,560 6,475 6,339 6,093
Net interest income 12,712 12,334 12,128 11,279
Provision for loan losses 198 124 597 387
Noninterest income 3,708 4,244 5,048 4,107
Noninterest expense 11,239 11,498 11,852 12,410
Income tax expense 1,065 910 875 431
Net income $ 3,918 $ 4,046 $ 3,852 $ 2,158
Basic earnings per common share $ 0.62 $ 0.64 $ 0.60 $ 0.33
Diluted earnings per common share $ 0.62 $ 0.64 $ 0.60 $ 0.33
Dividends per share $ 0.155 $ 0.150 $ 0.150 $ 0.145
2024 December September June March
Interest income $ 16,847 $ 16,548 $ 15,654 $ 15,300
Interest expense 5,950 6,362 5,995 6,120
Net interest income 10,897 10,186 9,659 9,180
Provision for loan losses (76 ) 200
-
-
Noninterest income 4,557 4,123 4,386 3,951
Noninterest expense 11,003 11,003 10,671 10,282
Income tax expense 892 752 261 481
Net income $ 3,635 $ 2,354 $ 3,113 $ 2,368
Basic earnings per common share $ 0.55 $ 0.35 $ 0.47 $ 0.35
Diluted earnings per common share $ 0.55 $ 0.35 $ 0.47 $ 0.35
Dividends per share $ 0.145 $ 0.140 $ 0.140 $ 0.135

Note 23: Operating Segments

The Company provides a range of community banking services, including commercial and consumer lending, personal and business banking, treasury management and merchant services, personal wealth management and brokerage services, and other financial services primarily to individuals, businesses, and municipalities. All of the Company's business activities are dependent and assessed based on the manner in which it supports the other activities of the Company.

The chief operating decision maker ("CODM") of the Company is the Chief Executive Officer, who along with others in the Company's executive management, evaluates performance and allocates resources based upon analysis of the Company as one operating segment. The activities of the Company comprise one reportable segment, "Banking." All the consolidated assets are attributable to the Banking segment. The accounting policies of the Banking segment are the same as those described in Note 1 "Organization and Summary of Significant Accounting Policies."

The CODM is provided with the Company's consolidated statements of financial condition and operations and evaluates the Company's operating results based on consolidated net interest income, non-interest income, non-interest expense, and net income, which can be seen on the consolidated statement of operations. These results are used to benchmark the Company against its competitors. Other significant non-cash items assessed by the CODM are depreciation, amortization and provision for credit losses consistent with the reporting on the consolidated statements of cash flows. Expenditures for long-lived assets are also evaluated and are consistent with the reporting on the consolidated statements of cash flows. Strategic plans and budget to actual monitoring are evaluated as one reportable segment. The actual results are used in assessing performance of the segment, determining the allocation of resources, and in establishing management's compensation. Information reported internally for performance assessment by the chief operating decision maker is identical to that which is shown in the Consolidated Statements of Income. All revenues were derived from banking operations for the years ended December 31, 2025, and 2024, and there was no customer that accounted for more than 10% of the Company's consolidated revenue.

F-43

Report of Independent Registered Public Accounting Firm

To the Shareholders, Board of Directors, and Audit Committee

SB Financial Group, Inc.

Defiance, Ohio

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of SB Financial Group, Inc. (the "Company") as of December 31, 2025 and 2024, the related consolidated statements of income, comprehensive income, shareholders' equity, and cash flows for each of the years ended December 31, 2025 and 2024, and the related notes (collectively referred to as the "financial statements"). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

F-44

Allowance for Credit Losses

As discussed in Note 1 to the consolidated financial statements, the Company's loan portfolio totaled $1.181 billion as of December 31, 2025, and the associated allowance for credit losses ("ACL") on loans was $16.114 million. As discussed in Notes 1 and 4 to the consolidated financial statements, the Company measures expected credit losses for loans on a pooled basis when similar risk characteristics exist using relevant available information, from internal and external sources, relating to past events, current conditions, reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Management also considers further adjustments to historical loss information for current conditions and reasonable and supportable forecasts that differ from the conditions that exist for the period over which historical information is evaluated as well as other changes in qualitative factors not inherently considered in the quantitative analyses. The resulting qualitative adjustments are applied to the relevant collectively evaluated loan pools.

We have identified the ACL, and more specifically the qualitative adjustments applied in the ACL, as a critical audit matter. The principal consideration for our determination is the high degree of judgment and subjectivity in auditing the assumptions utilized by management in calculating the qualitative reserve component. This required a high degree of judgement due to the nature and extent of audit evidence and effort required to address this matter.

The primary procedures we performed related to this critical audit matter included:

● Obtained an understanding of the Company's process and internal controls for establishing the ACL, including the selection, application and related adjustments of the qualitative factor components of the ACL.
● Evaluated the relevancy and reliability of the underlying data used to derive the qualitative factors, including comparison to internal, external and/or peer data to ensure movement in a directionally consistent manner.
● Assessed the appropriateness and reasonableness of the qualitative factor adjustments, including evaluating management's judgments as to which factors and relevant assessed risks impacted the qualitative adjustments for each loan pool.
● Evaluated the reasonableness of the assumptions utilized by management in calculating the qualitative reserve component.
● Tested the accuracy of the mathematical application of the qualitative factors to adjust the historical loss experience.

Forvis Mazars, LLP

We have served as the Company's auditor since 2002.

Indianapolis, Indiana

March 6, 2026

F-45

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

Not Applicable.

SB Financial Group Inc. published this content on March 06, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on March 06, 2026 at 17:50 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]